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02 October 2023

Deutsche Bank reports record 2007 profit

By Agencies

Deutsche Bank, Germany's top lender, posted on Thursday record net profit of 6.5 billion euros ($9.5 billion; Dh34.7 billion) for 2007 after avoiding further large write-downs on the US subprime mortgage debacle in the fourth quarter.


The outcome represented a gain of 7 per cent on the 2006 performance, Deutsche Bank said in a statement.


"We had no net write-downs related to sub-prime, CDO or RMBS exposures" in the fourth quarter, chairman Josef Ackermann said in the statement.


He was referring to the US market for high-risk, or subprime, mortgages and complex financial instruments backed by the home loans on which borrowers defaulted in large numbers last year, sparking a global credit crunch.


In the third quarter, Deutsche Bank had taken charges of €2.2 billion (Dh11.8 billion) to cover losses linked to the crisis and posted a loss of €837 million (Dh4.5 billion) as a result on trading income.


But Ackermann said on Thursday "those trading businesses in which we reported losses in the third quarter produced a positive result in the fourth quarter.


"In leveraged finance, where we had significant write-downs in the third quarter, net write-downs in the fourth quarter were less than €50 million (Dh268 million)."


The bank said 2007 pre-tax profit was up five percent to €8.7 billion (Dh47 billion).


Pre-tax return on equity, a key yardstick of profitability, slipped however to 29 per cent from 33 per cent a year earlier.


Deutsche Bank said it had taken provisions for credit losses of €612 million (Dh3.3 billion) last year, compared to €298 million (Dh1.6 billion) in 2006.


But it also said it would recommend a dividend payout of €4.50 (Dh24.15) per share, up €50 euro cents, or 12.5 per cent.


For 2008, the bank reaffirmed its pre-tax profit target of €8.4 billion (Dh45 billion), saying that "notwithstanding short-term uncertainties, the longer-term trends shaping our industry are moving in our direction."


In the turbulent fourth quarter of 2007, net profit was €1 billion (Dh5.36 billion), down 47 per cent from the same period a year earlier when the bank had benefitted from tax credits owing to changes in German law.


Pre-tax profit in the fourth quarter was off 25 per cent at €1.4 billion (Dh7.5 billion).


Corporate and investment banking turned in a fourth quarter net profit of €4.5 billion (Dh24.15 billion), "essentially unchanged" on a 12-month basis, and a full-year profit of €19.1 billion (Dh102.5 billion), for an increase of 2 per cent.


Private clients and wealth management, showed a three percent gain in fourth quarter profit to €2.5 billion (Dh13.4 billion) and a full-year increase of nine percent to €10.1 billion (Dh54 billion).


"Looking forward, we expect conditions to remain challenging in 2008," Ackermann acknowledged.


But he said the bank had "clearly strengthened its competitive position" last year, when some major US and European rivals suffered massive subprime related losses, and stressed that "our capital base is stronger than ever." (AFP)