Deutsche Bank Avoids Subprime Writedowns Posts Profits Decline (Bloomberg) (07-02-2008)

Feb. 7 (Bloomberg) -- Weathering the subprime storm much better than its peers, Deutsche Bank AG, Germany's biggest bank, announced a smaller than estimated decline in fourth-quarter profit having avoided the type of record losses that have hammered its peers.

Net income fell 48 percent to 953 million Euros ($1.39 billion), or 1.93 Euros a share, from 1.84 billion Euros, or 3.56 Euros, a year earlier, the company said in a statement today. The Frankfurt-based bank rose as much as 3 percent in German trading after beating the 923 million-euro median estimate of 12 analysts surveyed by Bloomberg.

Revenue gained 2 percent to 7.29 billion Euros, lifted by gains at the private and business clients unit. The company reiterated its pretax profit target of 8.4 billion Euros for 2008, excluding one-time costs and charges, and said it plans to raise the dividend by 13 percent to 4.50 Euros a share.

Deutsche Bank may miss the profit goal because a slowdown in debt markets threatens to stifle growth, according to the median estimate of 10 analysts surveyed by Bloomberg. The bank got almost half of 2007 profit from its securities unit.

The company gained 2.2 percent to 76.65 Euros at 9:15 a.m. today. It has fallen 35 percent on Germany's benchmark DAX Index in Frankfurt in the last six months, cutting its market value to 40.6 billion Euros. That compares with a 32 percent drop in the 60-member Bloomberg Europe Banks and Financial Services Index.

Like U.S. rival Goldman Sachs Group Inc., the world's largest securities firm, Deutsche Bank benefited from early bets against subprime mortgages. The German bank took no further losses in the quarter on collateralized debt obligations after booking gains from hedges and reducing such holdings.

The slowdown of the more than $2 trillion CDO market follows record downgrades last year in mortgage-linked securities, which repackage assets into new securities with varying risks.

Source: Bloomberg