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Banking profits

October 21, 2009

Germany's largest bank reported Wednesday that it's expecting third quarter net profits to top 1.4 billion euros, another sign of the banking industry's revival one year after the start of the global financial crisis.

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Deutsche Bank building in Frankfurt
Deutsche Bank declined government aid last fall and now reports strong profitsImage: bilderbox

In the surprise announcement, Deutsche Bank said pre-tax profits for the third quarter would be approximately 1.3 billion euros, up from 440 million euros in the same period last year. Analysts had expected the company to earn about 800 million euros. Tax credits will push the bank's net earnings up to 1.4 billion euros, the company reported in a statement.

Deutsche Bank, Germany's largest, also said all of its business segments were reporting positive results and that its "tier one" capital ratio, a closely watched measure of its financial soundness, rose from 10.3 percent to11.7 percent. Further details of the company's earnings will be released next week on October 29th.

The Frankfurt-based bank's announcement is the latest in a string of strong profit reports from financial firms. Sector bell-weathers Goldman Sachs and JP Morgan Chase also reported better than expected profits last week.

While Germany's Commerzbank and a raft of state-owned regional banks had to accept state aid in the wake of Lehman Brothers' bankruptcy, Deutsche Bank declined government aid last fall, when the financial crisis began, and is now poised to benefit from a recovery in the sector.

Acquisitions planned

Deutsche Bank CEO Josef Ackermann
Deutsche Bank CEO Josef Ackermann plans to buy out weaker rivalsImage: AP

The company has used its strength to acquire pieces of weaker rivals. On Tuesday, Deutsche Bank announced that it will purchase portions of ABN Amro from the Dutch government, which nationalized the bank last year. It is also nearing a deal to purchase 75 percent of private bank Sal. Oppenheim for approximately one billion euros.

Despite the positive news, Deutsche Bank shares fell sharply in Wednesday morning trading on the Frankfurt stock exchange, falling 3.16 percent to 53.59 euros while the DAX index of leading shares was essentially unchanged overall.

"That cannot be tied to the figures," said banking analyst Konrad Becker of Merck Finck in an interview with AFP news agency. Becker suggested the falling share price might be due to profit taking because the shares had recently been gaining in value.

bn/AFP/AP/DPA/Reuters
Editor: Sam Edmonds