Now that is shocking. Deutsche Bank did better than expected in the third quarter. That is not a fat-fingered typo – nor the usual brand of sarcasm.
The bank said at the beginning of this month that it saw pre-tax income coming in at about €1.2bn. In fact, it said on Wednesday, it managed €1.4bn.
Still 19 per cent down on the third quarter of last year, but a rare surprise on the upside. Charges on leveraged loans and loan commitments came in shy of worst forecasts, at €603m versus the €700m flagged. While €1.56bn in writedowns on debt and equity trading positions, structured credit and mortgage-backed securities was right on the target given (of about €1.5bn).
So, joy of joys, the investment bank lost only €179m in the quarter compared to €250–350m the market was prepped for.
Clever. The bank’s shares got a relief rally to the tune of 2.1 per cent back at the start of October when it quantified the potential losses. And the stock rose sharply early on Wednesday on the actual numbers, despite the obvious credit-related pain and the first loss at its investment banking arm in five years.
The Q3 results were also helped to gains on sales of corporate investments, notably in Allianz and Linde, a property deal at its Wall Street building, and the rise in value of an option to boost its stake in Chinese lender Hua Xie. German tax reforms even lent a hand in boosting the bottom line – up 31 per cent year on year.
But even the outlook from chairman Josef Ackermann was a world away from the self-doubting, rabbit in headlights stuff that we’ve been handed by other banks of late.
Looking forward, challenges undoubtedly remain; however, this is also a time of opportunity for Deutsche Bank. As a market leader in investment banking, and a major global asset gatherer, we stand to benefit from the flight to quality… Strategically, our path is clear: we stay the course! We have made a positive start to the fourth quarter, and assuming markets function at normal levels, we re-affirm our commitment to delivering on our 2008 financial targets.