Deutsche Bank posts profit, agrees to sell Mexico units

Move is part of plan to revive struggling German lender

Germany’s Deutsche Bank headquarters are seen next to the sculpture of a smiling man in Frankfurt, Germany. Photograph: Kai Pfaffenbach/Reuters

Germany’s Deutsche Bank headquarters are seen next to the sculpture of a smiling man in Frankfurt, Germany. Photograph: Kai Pfaffenbach/Reuters

 

Deutsche Bank said it agreed sell its Mexico units to Mexican lender InvestaBank, and posted an unexpected net profit of €278 million in the third quarter after a record loss in the year-earlier period

The lender benefited from a surge in bond trading that boosted all Wall Street banks’ earnings. “We continued to make good progress on restructuring the bank. However, in the past several weeks these positive developments were overshadowed by the attention around our negotiations concerning the Residential Mortgage Backed Securities matter in the United States. This had an unsettling effect,” chief executive John Cryan said in a statement.

The Mexico operation being sold is a tiny part of the lender’s global business; it has “almost 100 employees,” according to the bank’s website. The deal will close in 2017, subject to regulatory approvals, Deutsche Bank said, without disclosing the price.

Mr Cryan is trying to reverse a slide in shares that eroded more than 40 per cent of the company’s market value this year, amid investor concern about the US Justice Department initially requesting $14 billion to settle an investigation over the misselling of mortgage-backed securities in the run-up to the financial crisis..

Deutsche Bank said last year that it would be closing operations in 10 countries including Mexico as part of paring back its global operations. The InvestaBank deal comes two months after the lender announced the sale of a subsidiary in Argentina.

In its third quarter results, Deutsche Bank hiked the amount of money it has set aside to cover the legal bill for its numerous missteps of the past. Litigation reserves rose to €5.9 billion from €5.5 billion at the end of June.

Revenues were up slightly at €7.5 billion in the quarter, ahead analysts’ expectations, mainly driven by Deutsche’s trading activities, while business declined in all other operating businesses mainly due to the effects of the low interest-rate environment.

Deutsche Bank’s cash cow bond trading division, which has volatile revenues and tough capital requirements to meet, was up 14 per cent in the quarter, driven by Britain’s surprise vote to leave the European Union and bouts of anxiety about monetary policy around the world. Compared to its peers, Deutsche Bank’s bond trading activities however showed a subdued rebound, in part related to its decision to trim the unit. In equities trading, Deutsche Bank saw revenues decline in the quarter as low stock markets volatility gave investors less reason to trade, while revenues from corporate and investment banking fell by 1 per cent due to weaker M&A fees and capital markets activity.

Bloomberg, Reuters