FRANKFURT, Germany—Deutsche Bank AG said Tuesday that it made euro777 million ($1.1 billion) in net profit, beating analyst estimates, as stronger consumer banking made up for falling profits from trading securities amid market turbulence from Europe's government debt crisis.
The third quarter earnings figure contrasts with a loss of euro1.2 billion in the year-ago quarter, when the bank took a euro2.3 billion write-down related to consolidating its acquisition of a majority in branch-banking business Postbank.
CEO Josef Ackermann cited stronger results from the bank's consumer-oriented business and an effort to cut risky business at its investment banking operation amid market swings caused by Europe's crisis over heavily indebted governments. Fears of a government default by Greece or another indebted country and its potential impact on the banks who hold government bonds have led to ups and downs on stock and bond markets and fears of a recession.
Deutsche shares traded down 0.6 percent at euro28.31 in morning trading in Germany.
Ackermann said the quarter was the toughest since the one that followed the collapse of U.S. investment bank Lehman Brothers in late 2008.
"During the third quarter, the operating environment was more difficult than at any time since the end of 2008, driven by a deteriorating macro-economic outlook, and significant financial market turbulence," he said in a statement.
He said the bank "benefited significantly from the strategic decisions we have taken to recalibrate and de-risk our investment bank, increase the earnings contribution from our 'classic' banking businesses, and strengthen our capital, liquidity and funding position.
The bank's ratio of highest-quality reserves to loans and other investments was 10.1 percent, down slightly from 10.2 percent in the previous quarter. The so-called Core Tier 1 capital ratio is an important measure of a bank's ability to absorb losses. European leaders are seeking to push banks that are undercapitalized to hold at least 9 percent. Banks would have to raise money from investors if they could and from government if that failed.
The bank, Germany's largest, also wrote down euro228 million worth of shaky Greek bonds, whose value has fallen during the eurozone's government debt crisis because of fears Greece will force investors to take losses of 50 percent or more to escape its crushing debt burden.
The bank's chief financial officer, Stefan Krause, said the bank had now written down all its Greek debt holdings to market value -- at 46 cents on the euro -- and would not have trouble meeting European Union requirements and the phasing in of tougher capital requirements under the international Basel agreement. The bank has cut total exposure to by about two-thirds to bonds from Greece, Ireland, Portugal, which have needed bailouts to keep paying their debts, and to Spain, to euro4.4 billion.
Krause said that the bank was "confident we will not need public sector money."
The bank had already signalled the Greek writedown and said it won't make its profit target for this year.
Market analysts surveyed by Factset had foreseen net profit of euro425 million. The company's net revenues for the quarter were euro7.3 billion, up euro2.3 billion, or 47 percent, from a year ago. In last year's third quarter, revenues were reduced by the Postbank charge.
If the Postbank loss from last year is tossed out, revenues were essentially unchanged from a year ago as lower investment banking revenues were offset by higher retail and commercial banking revenues, primarily reflecting the addition of Postbank and its large branch banking network.
Sales and trading profits in debt and other products fell by euro784 million, while sales and trading of equities fell euro266 million.
That was offset in part by a euro971 million jump in revenues at the consumer and business banking business, much of which came from the addition of Postbank.