Postbank reports firm profits on drop in bad loan charge

11th November 2010, Comments 0 comments

Postbank, the leading German retail bank that is being courted by Deutsche Bank surprised analysts with a 4.8-percent rise in net quarterly profit on Thursday.

The bank announced net earnings of 65 million euros (89 million dollars), exceeding the figure of 45 million euros expected by analysts polled by Dow Jones Newswires.

A key element of the rise for the equivalent figure last year was a drop in porovisions for bad loans.

Banks make provisions for loans turning sour during a downturn and this reduces declarable profit, but as trading conditions improve any unused provisions are clawed back to the profit line.

But Postbank warned that the performance in the fourth quarter might fall short of outcomes so far this year while assuring that it "expects positive results" for the whole of 2010.

Loan provisions in the third quarter amounted to 134 million euros, a fall of 23.0 percent from the figure the previous quarter and of 5.6 percent on a 12-month basis. The figure was also lower than analysts had expected.

Since last year, Postbank has been working to dispose of financial assets considered to carry undue risk. On September 30 it had reduced its portfolio of such so-called structured instruments by 20 percent from the figure at the end of last year.

In the first nine months of the year, retail activities had made marked progress, the bank said. Activities financing businesses had also done well, owing to strong economic recovery in Germany.

The bank said that it had "continued to recover in the third quarter and to pull away from negative results last year" that stemmed from the economic crisis.

Operating profit for the quarter was 71.0 million euros from a loss of 29 million euros 12 months earlier.

The board of Postbank has backed an offer by Deutsche Bank to increase its holding in the business to 50 percent with a view to consolidating their two sets of accounts by the end of the year.

The offer runs until November 24. Deutsche Bank said on Wednesday that it now holds 41.43 percent of Postbank.

© 2010 AFP

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