Trading blows

30 October 2003

The bank didn’t take a big hit it says currency and other factors played a part in the decline. But the fall highlights how geared Deutsche is to trading. No wonder the bank is now focused on cranking up customer revenues.

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Deutsche Bank posted a third quarter net profit of E576m, which just exceeded the second quarter result and beat analysts' expectations. But trading revenues declined sharply from the second quarter.

Total revenues fell by 13% to E5.2bn in the quarter, mainly because of a 40% decline in trading revenues to E940m. Deutsche attributed the trading result to a number of factors, including seasonality as well as adverse currency and hedging effects.

Hedging cost Deutsche E200m in the period because of a mismatch between hedge assets, which it marked to market, and the underlying assets, such as loans to companies and stakes held in its industrial portfolio, which it held at historic cost.

The decline did not feed through to the bottom because Deutsche bore down on costs. Operating expenses fell by 5% to E4.2bn. In addition, improved credit conditions saw the bank halve loanloss provisions against the second quarter to E174m. And the bank wrote up a profit of E141m on offbalance sheet special purpose vehicles it was forced to consolidate under US accounting rules.

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