| It could have been worse. Given the losses that have been reported by some banks because of subprime exposure and current credit conditions, Deutsche Bank investors must have breathed a sigh of relief on Wednesday when it appeared as though its quarterly profit would come in on target. Shares in Germany's largest bank rose 2.2%, or $2.89, to $135.51, in Frankfurt on Wednesday morning after Chief Executive Josef Ackerman told a banking conference in London that third -uarter net profit would exceed $2.0 billion. Any losses Deutsche Bank had suffered because of the recent turbulence in the credit market would be offset by the income generated at its asset-management and private- and corporate-client divisions. Ackermann said the results meant it was on track to reach it $11.9 billion annual pretax profit target. The results come two days after Switzerland's UBS said it would post a pretax loss of up to $690 million when it announces its third-quarter earnings at the end of October. But Deutsche Bank hasn't emerged unscathed from the credit malaise. It's taking a total charge of 2.2 billion euros ($3.1 billion); that's a writedown of 1.5 billion euros ($2.1 billion) on structured credit products and securities backed by residential mortgages, along with a 700 million euro ($993 billion) charge on leveraged loans and loan commitments. Ackermann said that other businesses in the corporate banking and securities unit had produced strong results for the quarter, but overall the division would post a loss of 250 million euros ($355 million) to 350 million euros ($496 million). Deutsche Bank is perhaps fortunate to not be saddled with the legacy costs of a closed-down hedge fund as is the case at UBS. The ongoing charges to Dillon Read Capital Management, an in-house fund that it closed in July, is one of the main reasons why UBS is now hemorrhaging profits in the midst of a rise in subprime mortgage defaults in the United States and the rising cost of lending. Deutsche's investors had been concerned it might have been in a similar boat after reports in September said its third-quarter profit could fall as much as 1.7 billion euros ($2.4 billion), because it hadn't been able to find buyers for the risky debt it was holding. Meanwhile on Wednesday, French lender BNP Paribas said that its risk exposure to the American subprime crisis was below 100 million euros ($142 million). |
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