Big drop in quarterly profit at key Treasury SOE float adviser Deutsche Bank

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By Gareth Vaughan

Deutsche Bank New Zealand has posted a huge fall in unaudited March quarter profit as its trading income tumbled and a big hit from foreign exchange conversion was recorded.

Deutsche Bank's General Disclosure Statement (GDS) for the three months to March 31 shows net profit of NZ$2 million, down from NZ$28 million in the same period of 2011.

The bank operates in New Zealand as a branch of Deutsche Bank AG. As of December 31 last year about 0.1% of the Group's liabilities were located in New Zealand. About 49.2% were located in Deutsche Bank's home country of Germany.

Deutsche Bank owns 49.9% of Craigs Investment Partners. The two are jointly engaged as Crown adviser to Treasury on the Government's plans to sell up to 49% stakes in four state owned energy companies through sharemarket floats and sell down its 73% Air New Zealand stake to no less than 51%.

Although the GDS shows an NZ$80 million turn around in net interest income to NZ$26 million from negative NZ$54 million, net trading income was just NZ$9 million versus NZ$50 million and other operating income came in at negative NZ$22 million, after tumbling NZ$76 million from NZ$54 million. This was attributed to a loss of NZ$23 million on foreign exchange remeasurement, or conversion, slightly offset by NZ$1 million in fee and commission income.

In its Financial Institutions Performance Survey Review of 2011, released in April, KPMG noted Deutsche Bank's interest margin fell to 0.58% from 3.01%. However, KPMG said this ought to be taken in the context of the business written by Deutsche Bank given it's an investment bank rather than a trading bank.

The GDS shows Deutsche with total loans of NZ$351 million at March 31, down NZ$60 million from December 31 last year. Its individually impaired assets were unchanged at NZ$36 million, and its provision for loan impairments NZ$11 million.

Meanwhile, Deutsche Bank may have had the biggest individual exposure to the Yellow Pages Group, where banks wrote off more than NZ$1 billion of debt early last year. At the time interest.co.nz was told Deutsche Bank had total exposure to Yellow Pages of about NZ$200 million, evenly split between subordinated and senior debt.

Its 2011 GDS shows audited annual impairments on loans down to just NZ$11 million from NZ$76 million in 2010. The bank recorded a net profit of NZ$21 million in 2011 versus a loss of NZ$54 million in 2010 when NZ$61 million was repatriated to its parent. No money was repatriated last year.

As of March 31 this year, total assets were NZ$2.901 billion, down NZ$192 million from December 31, and total liabilities were down by the same amount to NZ$2.790 billion. Equity was down NZ$1 million to NZ$111 million.