Deutsche Postbank swung to a pretax profit in the second quarter, helped by higher interest income and a smaller hit on subprime-related assets, but raised provisions for potential bad loans.
Chief executive Stefan Juette said in a statement he expects earnings in the second half of the year to fall short of the first half, although they will be positive for the whole of 2010.
Germany's largest retail bank by clients also scrapped its medium-term profitability target given the uncertainty over the impact of banking regulations.
A reliable target was only possible once regulatory decisions on matters such as a possible bank levy or core capital requirements have been made, the bank said.
Deutsche Postbank said it made €94 million pretax profit compared with a €29 million loss in the year-earlier period, just beating analysts' forecast of €78 million.
Postbank's quarterly results mirror a rise in earnings seen at other banks with large retail operations such as Societe Generale and HSBC signalling a recovery within the banking sector.
Earlier this year, Postbank had said it aims for a medium-term return on equity after taxes of 13 per cent, which clearly lags that of peers such as Deutsche Bank.
The lender recently scraped through a European stress test with a tier one capital ratio just 0.6 percentage points above the required 6 per cent under the most extreme scenario for 2011.
Postbank today said its tier one capital ratio remained at 7.3 per cent at the end of June, the same level as at the end of March.
It reiterated it would continue measures to bolster its capital position and reach a ratio of 9.5 per cent by end-2012.
Postbank's net interest income rose 18 per cent to €671 million in the second quarter, but provisions for potential bad loans rose to €175 million from €120 million a year earlier, reflecting continued fallout from the financial crisis.
Postbank's writedowns from assets tied to subprime mortgages fell to €174 million in the second quarter, from €431 million in the year-earlier period.
Reuters