Deutsche Bank Reports Third Quarter Profit

By Tom Sims and Matthias Inverardi

FRANKFURT (Reuters) – Deutsche Bank rebounded to profitability in the third quarter by reducing reserves for investor lawsuits related to its Postbank division, while its global investment bank performed strongly.

After interrupting a 15-quarter profit streak in the second quarter due to a significant provision for lawsuits, Deutsche settled some cases and lowered provisions by €440 million ($475 million), boosting profits.

The bank announced plans for a share buyback, previously on hold due to Postbank issues, although credit loss provisions doubled compared to a year earlier.

Net profit for shareholders surged to €1.461 billion, a 42% year-over-year increase, matching expectations after a loss of €143 million in the previous quarter. CEO Christian Sewing stated that the bank made significant progress in addressing legacy litigation while achieving record profits from their operational business.

Investor lawsuits, stemming from claims of underpayment in the Postbank acquisition during the financial crisis, continue to affect Deutsche's share price. While some suits have been resolved, others await court hearings.

The bank's investment banking division was its primary revenue generator, with a revenue increase of 11%, outperforming expectations. However, revenues from retail and corporate banking segments were stagnant or declining.

Within the investment bank, fixed-income and currency trading revenues rose 11%, exceeding expectations, while origination and advisory revenue grew by 24%. Despite challenges in the sector, Deutsche Bank is expected to maintain profitability due to strong investment banking activity.

Recent speculation regarding potential mergers, particularly with Commerzbank, has been addressed by Deutsche officials, who reaffirmed that they are focused on their strategic objectives.

($1 = 0.9257 euros)