Deutsche Bank looks for acquisitions as profits soar (FT)

Deutsche Bank became an undisputed bulge-bracket bank yesterday, after trouncing expectations for first-quarter performance, with record profits and a 40 per cent pre-tax return on equity.

Hailing the result as “outstanding”, Josef Ackermann, chief executive, said in an interview with the FT that he was interested in cementing Deutsche’s strength through acquisition. “Retail [banking] is primarily where I see opportunities for acquisitions,” he said. “A deal could be anywhere between €1bn and €5bn, but I also would not exclude something bigger if it makes strategic sense.”

Mr Ackermann said future growth would not come at the expense of regulatory slip-ups. There would be a “zero tolerance” approach to transgression, he said, in response to last month’s £6.4m FSA fine for market misconduct.

On the outlook for the year, Clemens Börsig, Deutsche’s finance director, who on Thursday moves to the role of supervisory board chairman, said the bank could “revisit [its] targets in the second half”, possibly upgrading the current 25 per cent ROE and double-digit earnings growth targets for the year. Analysts at Citigroup said ROE could be 30 per cent.

In the first three months of the year, Deutsche’s net profits surged 55 per cent to a record €1.7bn. The result, underpinned by strong market conditions generally, got a particular boost from rapid growth in equities sales and trading, and from corporate advisory business.

Deutsche executives said the figures catapulted the German bank into the top league of global investment banks, with only Goldman Sachs generating superior, though riskier, returns.
Huw van Steenis, analyst at JP Morgan, said: “This just underscores that Europe, Asia and emerging markets are outgrowing the US.”

Deutsche’s equity sales and trading revenues jumped 90 per cent to €1.6bn, driven by growth in equity derivatives and emerging markets. Advisory revenues rose 58 per cent to €180m. In retail banking, there was an 11 per cent increase in revenues to €1.3bn thanks to sharp growth in private client investment activity.

Overall, in corporate and investment banking, Deutsche saw underlying pre-tax profits rise 33 per cent to €2.1bn. In retail banking and asset management, profits rose 37 per cent to €558m.
But Mr Ackermann will be given little time to bask in the figures. The criminal court in Düsseldorf said last month that it wanted to begin a retrial of the long-running Mannesmann case in the summer.
read