FRANKFURT (AFP) - Deutsche Bank boosted its bottom line strongly in the third quarter thanks to cost-cutting and lower risk provisions, figures showed but Germany's biggest bank is still a long way from achieving the profitability targets it has set itself for next year.
Deutsche Bank said in its interim report that it booked net profit of 680 million euros (860 million dollars) in the period from July to September, 18 percent more than in the corresponding period a year earlier.
Pre-tax profit was up 33 percent at 1.0 billion euros.
Both figures were at the top end of analysts' expectations and chairman Josef Ackermann said net profit was the highest quarterly result the bank had ever achieved under US GAAP accounting rules.
"We achieved this result despite the persistently difficult market environment," Ackermann boasted.
Deutsche Bank certainly made headway on the cost front and in lowering its exposure to bad or risky loans.
Risk provisions were cut in half in the three-month period to 83 million euros.
And general administrative costs were also lowered by six percent to 3.97 billion euros.
But a closer look at the figures showed that the quality of the earnings was mixed.
Net interest income after risk provisions, for example, fell to 1.075 billion euros from 1.438 billion euros and net commission income was down by 3.8 percent at 2.29 billion euros.
Only own-account trading income shot up by 35 percent to 1.27 billion euros.
And a key profitability yardstick, the pre-tax return on equity, stood at 20 percent at the end of September, way below the 2005 goal of 25 percent.
Investors were correspondingly lukewarm about the numbers.
In early afternoon trading on the Frankfurt stock exchange, Deutsche Bank shares were showing fractional gains of just 0.07 euros or 0.12 percent at 59.53 euros after falling one percent to an intraday low of 58.86 euros.
Nevertheless, chairman Josef Ackermann insisted: "We are strongly determined to achieve the goals we have set ourselves."
And chief financial officer Clemens Boersig also told a telephone conference with analysts he was "confident" that the return on equity target of 25 percent could be reached by next year. But analysts believe the goal to be unrealistic.
Deutsche Bank would have to turn in pre-tax profit of 6.5 billion euros for the full year to reach that goal and, so far in 2004, the bank has only earned 3.7 billion euros before taxes.
Industry experts say the only option would be to embark on even more stringent cost-cutting, apparently the strategy preferred by chairman Ackermann.
A key critic of Ackermann, Ulrich Cartellieri announced Thursday he was quitting the supervisory board "due to differences over strategy."
And the departure of the highly respected 67-year-old banker could certainly give Ackermann a freer hand.
Swiss-born Ackermmann is wanting a drastic shake-up of the investment banking activities and press reports have recently suggested that around 2,000 in the division could be on the line.
Deutsche Bank's high-street banking activities may not be spared, either -- the bank is planning to downsize its branch network and that could involve job cuts.
Since 2001, the group has axed around 13,000 jobs. The workforce currently numbers 65,700.
10/29/2004 - 11:44 GMT - AFP