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Deutsche Bank 1Q net up
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May 5, 1999: 6:39 a.m. ET
Corporate activity boosts largest German bank; Hypo earnings higher
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LONDON (CNNfn) - Deutsche Bank reported a 36.5 percent rise in first-quarter profits Wednesday as Germany's largest bank rode the boom of corporate activity in Europe and the rebound in emerging markets.
Deutsche's net profit climbed to 621 million euros ($586 million) from 455 million a year earlier while trading profits jumped 70 percent to 1.11 billion euros from 654 million.
The results were ahead of expectations but broadly in line with the trend of rising earnings at other investment banks. Merger and capital market activity has recovered strongly from the lows recorded after the Russian crisis started last August.
The one exception to the trend was Bankers Trust, which last week reported a drop in first-quarter profits. Deutsche said it was close to securing U.S. regulatory approval for its takeover of BT.
"We are confident that the positive development of our earnings will continue in the course of the year if the market remains positive," said chief executive Rolf Breuer said in a letter to shareholders.
Analysts said the results were in line with expectations, but added that Breuer remains stung by internal opposition to the BT deal. Jurgen Krumnow, a member of the board and chief financial officer, last week became the latest board member to depart, reportedly in opposition to the terms of the BT takeover.
Deutsche (FDBK) shares dipped 0.90 euro to 56.60 euros following the earnings announcement.
While Deutsche's pretax profits fell 3.2 percent to 894 million euros, the result included a 205 million euro charge to meet Y2K costs in the first three months.
Deutsche was hit hard by its exposure to emerging markets, notably in Russia and Asia. However, loss provisions fell 3.8 percent to 102 million euros though administration costs jumped 21 percent to 3.0 billion euros.
Germany's second-largest bank, Munich-based HypoVereinsbank, also reported a sharp rise in first-quarter earnings Wednesday. Operating profits climbed 34 percent to 422 million euros ($450 million).
The bank said its corporate finance unit, which made heavy losses in 1999, had reached a turnaround and predicted a significant increase in operating profits and improved return on capital for the all of 1999.
However, the bank's management faces a stormy shareholders' meeting on May 9 following the discovery of huge loan losses at Hypo-Bank before its merger with Bayerische Vereinsbank last year. Former Vereinsbank shareholders may seek compensation for the over-valuation of Hypo shares.
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