By Eyk Henning
FRANKFURT-- Deutsche Bank AG on Sunday said its first-quarter
net profit fell around 50% as strong revenue growth was outweighed
by a record penalty to settle with authorities over rate-rigging
allegations earlier this week.
Germany's largest bank said quarterly profit fell to EUR559
million ($607.8 million) from EUR1.1 billion a year earlier, while
revenue rose 24% to EUR10.4 billion.
"These results provide a snapshot of a Deutsche Bank which is
much stronger than when we began our journey in 2012. We have
delivered robust operating performance," Co-Chief Executives Jürgen
Fitschen and Anshu Jain said.
Analysts forecast an average net profit of around EUR770 million
and revenue of EUR8.9 billion.
The consensus estimates were compiled before Deutsche Bank said
Wednesday it would set aside EUR1.5 billion in additional
litigation reserves for the quarter. The bulk of that sum was to
cover a record $2.5 billion charge for settling with U.S. and U.K.
regulators over allegations it manipulated the London interbank
offered rate, or Libor.
The bank late Friday provided a preview of its long-awaited new
strategy, confirming reports that it would dispose of its retail
unit Postbank by floating a majority stake on the stock market. The
bank will present the details of its overhaul Monday morning.
The overhaul is deemed necessary as Deutsche Bank is lagging
behind its rivals in profitability, capital adequacy and share
price. In the first quarter, return on equity--a key gauge of
efficacy--fell to 3% from 8%, also burdened by a bank levy of
EUR561 million for a rescue fund designed to shield taxpayers from
having to pay for future bank failures.
A disposal of Postbank would hand Deutsche Bank's
investment-banking activities an even more pronounced role. In the
first quarter, the unit's revenue rose 15% to EUR4.65 billion,
contributing around 45% of the bank's total revenue. The growth was
underpinned by strong performances from its fixed-income and
equity-sales-and-trading operations, whose revenue grew 9% and 31%,
respectively. Increased trading activity was sparked by a stronger
U.S. dollar and the European Central Bank's bond-buying
program.
Deutsche Bank therefore outperformed many of its U.S. rivals in
investment banking. Goldman Sachs Group Inc., J.P. Morgan Chase
& Co. and Morgan Stanley's investment-banking revenue grew
between 3% and 8% in the first quarter.
Profit at the German lender's investment bank was dented,
however, by the Libor charge.
The German lender's asset-and-wealth-management unit, which is
slated to grow further under the new strategy, boosted revenue 29%
to EUR1.4 billion, also helped by a stronger U.S. dollar.
Revenue at the bank's global transaction banking operations rose
11% to EUR1.1 billion, with its retail-banking revenue remained
largely unchanged at EUR2.5 billion, with EUR935 million coming
from Postbank.
Write to Eyk Henning at eyk.henning@wsj.com
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