FRANKFURT (AFP) — Deutsche Bank, the top German bank, seems to be weathering the global financial crisis better than rivals, posting stronger third quarter net profit Wednesday despite the US mortgage meltdown.
Its results came in contrast to those of UBS, Merrill Lynch and Citigroup, which have been hit hard by the fallout from the US subprime home loan market collapse.
One-off items along with solid retail and asset management operations helped Deutsche Bank pull through a global banking crisis although analysts declined to draw conclusions from its results for the sector as a whole.
For July to September, the German bank's net profit grew 31 percent to 1.62 billion euros (2.34 billion dollars), exceeding its own estimate provided earlier this month of 1.4 billion euros.
Pre-tax profit, the bank's main benchmark, fell by almost 19 percent to 1.45 billion euros, but that was in line with market expectations and better than Deutsche Bank's own forecast of a 33 percent drop.
Looking ahead, a bank statement quoted chairman Josef Ackermann as saying: "Strategically, our path is clear: we stay the course."
The fourth quarter had gotten off to positive start "and assuming markets function at normal levels, we reaffirm our commitment to delivering on our 2008 financial targets," he added.
That was good news for the Frankfurt stock market, where Deutsche Bank shares finished the day up 3.66 percent to 92.05 euros.
The DAX index of leading shares rose 0.52 percent.
"The bottom line was significantly higher than preliminary figures indicated," one trader commented.
The Oppenheim brokerage stressed that unlike some peers, Deutsche Bank did not increase previously announced charges related to the global credit crisis.
And while Ackermann acknowledged that challenges remained, "the bank had a positive start to the fourth quarter," the first dealer noted.
Analysts underscored a sharp drop in non-interest expenses, which fell 22 percent as performance-related bonuses in the investment bank division dropped to nearly zero.
"In our view, this cost flexibility is clearly positive," said Philipp Haessler at Equinet.
Oppenheim analyst Carsten Werle told AFP the Deutsche Bank results painted "a clearly better picture than we've seen from several other investment banks in recent days."
Earnings from retail, asset management and transaction banking operations, along with 600 million euros from the sale of industrial holdings, partly offset 2.2 billion euros in markdowns linked to the banking crisis.
"The third quarter of 2007 was a period of exceptional turbulence in financial markets," Ackermann commented.
The bank posted a loss of 837 million euros in trading income, against a gain of 1.49 billion in the same period a year earlier.
But that was minor next to the likes of Merrill Lynch, which ousted chairman and chief executive Stan O'Neal on Tuesday after reporting some of the biggest losses in its history.
Closer to home, the biggest Swiss bank, UBS, announced a third quarter loss of 830 million Swiss francs (495 million euros, 713 million dollars), in large part because of the US crisis.
Ackermann said the situation that had emerged from the subprime debacle "is also a time of opportunity for Deutsche Bank."
Thanks to its strong position in investment banking, "we stand to benefit from the flight to quality," he forecast.
Werle concluded that while Deutsche Bank might face fewer risks than others, "we don't know where the markets will go in the next two months.
"There could still be something bad in the fourth quarter; we can't exclude that."
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