Deutsche Bank moves into profit

Deutsche Bank reported pre-tax profits of €1.8 billion for the first quarter, clawing its way back from a catastrophic €6.2 billion pre-tax loss in Q4 of 2008.

The group's corporate and investment bank division achieved net profits of €4.9 billion, up from €1.5 billion in Q1 of 2008. Its Tier I capital ratio also improved slightly, rising from 10.1% to 10.2% during the quarter. 

Despite the positive top line, Deutsche Bank reported total mark-downs of €1 billion, including €841 million from provisions against monoline insurers. Revenue in equities sales and trading in Q1 was €275 million, down from €745 million in Q1 last year, a drop the group attributed to “losses in equity derivatives and lower cash equities revenues”. The bank has been scaling back its exposure to structured credit instruments and reports its trading activities for subprime collateralised debt obligations dropped from €485 million to €428 million during Q1. Exposure to leveraged loans fell from €994 million to €527 million in the same period, but exposure to the US residential mortgage business rose marginally from €1.26 billion to €1.37 billion.

"In the first quarter of 2009, we saw some signs of stabilisation in the world's financial markets," said Josef Ackermann, chairman of the management board at Deutsche Bank. "This positive result was driven largely by the performance of our investment banking business."

Ackermann pointed to the success of foreign exchange, money markets and interest rate trading, and said the bank had invested in growth areas such as commodities trading, prime services and emerging markets debt. "Very strong revenues in these businesses, together with healthier margins, more than compensated for the absence of revenues in illiquid, structured trading areas that have been severely affected by the credit crisis," he said.

At the request of Deutsche Bank's supervisory board, Ackermann yesterday agreed to extend his contract by three years, meaning he will remain in office until the bank's annual general meeting in 2013.

See also: Deutsche hit by €1.7 billion equity derivatives losses in Q4