Cosmopolitan owner takes loss of $653 million

staff and wire reports

Tuesday, April 28, 2009 | 8:29 a.m.

Deutsche Bank AG, Germany's biggest bank, said today it took a charge against earnings of about $653 million to reflect the declining value of its Cosmopolitan resort on the Las Vegas Strip.

The bank, without elaboration, said it took an impairment charge of euro 500 million on the project, which it acquired out of foreclosure last fall for about $1 billion. The $3 billion property near CityCenter remains under construction on the Las Vegas Strip.

The impairment charge is similar to other noncash writedowns other companies on the Las Vegas Strip have taken on their properties as the recession has hurt the value of those properties.

Deutsche Bank, based in Frankfurt, today said it returned to profit in the first quarter on better trading results after suffering losses in the same quarter a year ago.

The bank also provided a measure of certainty by extending the contract of chief executive Josef Ackermann late Monday.

The bank said net profit for the January-March period came in at euro 1.2 billion ($1.56 billion). That compared to a net loss of euro 141 million in last year's first quarter.

Revenue increased 57 percent to euro 7.2 billion from euro 4.6 billion in the first quarter of 2008, and Deutsche Bank said its tier 1 capital ratio -- a measure of its financial strength -- was 10.2 percent at the end of the first quarter, above its stated target of 10 percent.

The bank said products in a number of areas showed stronger trading and sales volumes, which helped contribute to the better results. Deutsche Bank said for example, that foreign exchange, money market and interest rate trading saw a 185 percent increase in revenues, contributing to the corporate banking and securities division's overall sales and earnings. Other divisions also saw significant gains.

"Once again, we demonstrated our strength, as we have consistently throughout this crisis," CEO Josef Ackermann said in a statement. "But in this quarter, we also proved our earnings power. We have consistently delivered capital strength and balance sheet discipline, and sustained a healthy liquidity and funding position."

Ackermann said the company sees continued challenges for 2009, but did not offer a more detailed outlook.

The first-quarter profit compared with a huge euro4.8 billion net loss in last year's fourth quarter, which was blamed largely on big trading losses. That helped push Deutsche Bank to a full-year loss of euro 3.9 billion.

For the first quarter, Deutsche Bank reported large year-on-year revenue increases in several areas.

It had a 226 percent increase in corporate and investment banking revenues to euro 4.9 billion, compared with euro 1.5 billion in the first quarter of 2008. The corporate banking and securities division saw a 377 percent increase in revenues, to euro 4.2 billion from euro 880 million.

Global transaction banking revenues improved marginally to euro 666 million.

However, the asset and wealth management division's revenues were 49 percent lower, falling to euro 515 million from around euro 1 billion, and the private clients and asset management division, and the private and business clients unit, also saw revenues decline.

Although Deutsche Bank did not immediately offer a detailed outlook today, its recently published annual report cautioned that "revenues will be adversely impacted by softening demand from clients in some product areas" amid the economic slowdown and market wariness.

On Monday evening, Deutsche Bank said it had decided to extend Ackermann's contract for another three years until 2013.

Supervisory board chief Clemens Boersig said that "Ackermann has strategically and successfully guided the bank through the crisis."

Unlike several others, such as rival Commerzbank AG, Deutsche Bank has not sought help from a German government bank rescue fund.

Analysts surveyed by Thompson Reuters had predicted net profit of euro 808 million for the first quarter and euro 6.1 billion in revenues. UniCredit analyst Andreas Weese noted that earnings "clearly beat both the consensus estimate and our more confident forecast of euro 900 million."

"Deutsche Bank sees continued challenges, but also opportunities in its business environment," he said. The decision to extend Ackermann's term "reduces uncertainties about a potential successor, which is clearly positive in the current uncertain environment, in our view."