Deutsche Bank Returns to Profit on Trading Rebound (Update1)

By Aaron Kirchfeld and Jann Bettinga

April 28 (Bloomberg) — Deutsche Bank AG, Germany’s biggest bank, returned to profit in the first quarter as a thaw in credit markets buoyed revenue from trading.

Net income was 1.19 billion euros ($1.55 billion), or 1.92 euros a share, compared with a loss of 131 million euros, or 27 cents, a year earlier, the Frankfurt-based bank said in a statement on its Web site today. Analysts surveyed by Bloomberg estimated earnings of 773 million euros.

Deutsche Bank, which posted its first annual loss in more than 50 years in 2008, profited from record sales of corporate bonds and an improvement in credit markets. Chief Executive Officer Josef Ackermann agreed to extend his contract by three years after leading the bank back to profit.

“Bond sales propelled earnings at Deutsche Bank and its competitors,” said Daniel Hupfer of M.M. Warburg in Hamburg, who helps manage about 31 billion euros, including Deutsche Bank stock. “But we’re not through the financial crisis yet. Risks remain in banks’ books and Deutsche Bank could face further writedowns.”

Deutsche Bank rose 55 percent so far this year in Frankfurt trading. The stock is the third-biggest gainer in the Bloomberg index of 65 European banks, following a 69 percent slump last year. The company has a market value of 26.9 billion euros.

Markets Thaw

The freeze in global credit markets showed signs of a thaw in the first quarter. Sales of corporate bonds surged to a record 387 billion euros, double the amount raised in the same period in 2008, according to data compiled by Bloomberg. The Libor-OIS spread, a gauge of the reluctance of banks to lend, fell to 97 basis points on March 31 from 121 basis points at the end of 2008.

Credit Suisse Group AG, Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. announced first-quarter results that beat analysts’ forecasts as trading revenue surged.

Deutsche Bank said late yesterday that Ackermann, 61, agreed to a request from the bank’s supervisory board to remain CEO until the annual general meeting in 2013. The Swiss-born executive, who helped Deutsche Bank skirt the worst of the U.S. subprime mortgage crash and resist taking government aid, had been scheduled to step down in May 2010.

‘Caution and Vigilance’

“Looking forward, we see continued challenges, but also opportunities, in our business environment,” Ackermann said in a letter to shareholders today. “Nevertheless, continued caution and vigilance will be essential.”

“Deutsche Bank is well-positioned not only to weather the current crisis, but also to emerge stronger than ever in the medium term,” Ackermann said.

Ackermann said on March 24 the bank had made a “good start” to the year after scaling back risky businesses and shedding assets including leveraged loans and commercial real estate. The company said at the time it expected to return to profitability this year if the global economy, financial markets, legal and regulatory environment and competitive situation develop as the bank expected.