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Bumper profits from investment banking polished Deutsche Bank's third-quarter figures, even as Germany's flagship lender grappled with the economic slump by more than doubling provisions for problem loans.
Deutsche said all divisions were profitable in the quarter, but the main driver of earnings was the corporate and investment bank, which accounted for 1.18 billion euros ($1.74 billion) of the group's 1.3 billion euro pretax profit.
In early trade the bank's shares were down 1.4 percent at 48.21 euros, underperforming the DJ Stoxx European bank sector index, which was up 0.9 percent.
Deutsche said its provisions for credit losses rose to 544 million euros in the third quarter from 236 million euros in the year-earlier period, but down from 1 billion euros in the second quarter and less than analysts had expected.
Deutsche's provisions related mainly to exposure in leveraged finance and commercial real estate and deteriorating loans in Poland and Spain, the company said on Thursday.
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Loan loss provisions in the U.S. and most European countries should peak within the next six months, Deutsche said, adding that favorable valuations in some asset classes should support the bank's securities business in the fourth quarter.
"The earnings are high quality," WestLB analyst Georg Kanders said. "All units performed better than I had expected. The low level of risk provisions was positive."
Chief Executive Josef Ackermann said the global credit crisis created opportunities for Deutsche to bolster its long-term competitive position. "Looking ahead, we see challenges and opportunities in the environment. We are well prepared for both," he said in a statement.
Like rivals Credit Suisse, JP Morgan and Goldman Sachs, Deutsche's sales trading business was boosted by a recovery in equity markets.
Deutsche said it would continue to reduce its risk profile at its trading business and had taken steps to diversify its business into corporate banking and wealth management with the acquisition of Sal. Oppenheim and parts of ABN Amro.
Deutsche Bank made a net profit of 1.4 billion euros, flattered by 369 million euros in net tax benefits relating to tax audit settlements for prior years, and gains from the sale of a stake in carmaker Daimler.
The Thomson Reuters I/B/E/S estimate for net income had been just 755 million euros.
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Data is a real-time snapshot *Data is delayed at least 15 minutes