Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB), the largest European lender, said on Tuesday that its third quarter profits were almost flat, as the better than expected performance of investment banking unit was subdued by the expenses related to litigation and the restructuring program.
For the quarter ending Sept. 30, the German bank’s net profits declined to 755 million euros ($795 million) from 777 million euros in the same period last year, the bank said in a news release. Total revenues jumped 18 percent, to 8.7 billion euros. The investment banking unit, which is troubled by the eurozone crisis and increased regulatory pressure, demonstrated a strong recovery. Its revenues rose 67 percent to 2.5 billion euros, as trading activity is gaining momentum.
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Deutsche Bank’s joint chief executives, Anshu Jain and Jürgen Fitschen, said that the economic environment for banks still remains challenging. “In the near term, the macro environment remains uncertain, and we will maintain a cautious and risk-focused approach,” they said.
All the European banks are going through turmoil caused by sovereign debt crisis, at the same time regulators are forcing the banks to split their retail banking operations from investment banking. Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) earns most of its profits from the investment banking division, so the proposed EU rules of splitting the investment banking would heavily affect the German bank.
However, the bank benefited due to reduced tension in the eurozone. ECB said it would purchase bonds from the struggling countries to keep the borrowing costs under control. That has eased the fear of a breakup of the eurozone.
Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) is among the four firms accused of manipulating the Libor rates, which are used to determine the interest rates worldwide. The quarterly profits would have been much higher, had the litigation not cost 289 million euros during the quarter. The bank spent another 276 million euros on the restructuring program that aims to make it more efficient and less complex. The lender had earlier said it would lay off 1,900 employees from the investment banking unit this year, of which 1,200 people have been fired as of September 30.
Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) shares jumped 4 percent to 34.62 euros, riding on better than expected increases in revenue. Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB) stocks are up 18 percent this year so far.