Deutsche Bank is winning market share to combat falling margins in its key investment banking arm and is confident of its ambitious 2011 profit target, its executives have said.
Germany's premier institution also revealed an average investment banker pay of over $500,000 (£309,000) each last year, a bigger bonanza than that enjoyed by Goldman Sachs employees.
Profits from trading and underwriting deals accounted for 88 per cent of Deutsche's profits in the fourth quarter, and as regulation squeezes margins, market share has become key.
The bank expects growth outside investment banking to reduce that contribution to 50 per cent over the next three years.
"Our confidence that we can achieve this (€10bn 2011 profit) target stems from the fact that we not only made provisions for the future in 2010, but we also set new records and captured market share in many businesses," said Chief Executive Josef Ackermann.
Anshu Jain, head of the investment banking division and a front-runner to take over from Ackermann when he retires in 2013, said the market share was now the key.
"Margins have now stabilised but are sharply lower than they were right post crisis... So I would not say the margin story is a very positive story. It is a volume and market share competition," he said.
The bank packed a raft of restructuring charges into its 2010 figures earlier this week and missed expectations by a big margin. On Thursday Ackermann said the bank remained on track to deliver pretax profit of €10bn in 2011.
Analysts remain sceptical, and a Reuters poll showed that the bank was not expected to get close to that figure before 2012.
"If Deutsche Bank really reaches its 2011 target, we and many others will have to massively raise earnings estimates," said Christine Schmid, an analyst at Credit Suisse Private Banking, which had 935bn Swiss francs of assets under management in September.
Nevertheless, Deutsche Bank shares were up two per cent in afternoon trading after an initial decline in early trade, outperforming the STOXX Europe 600 Banks index, which was down 0.4 per cent.
Analysts said they were relieved that details of the results did not contain any skeletons in the closet, although the lender published few details on its surging costs.
"The good news is that the pretax miss they forewarned about on Monday seems entirely driven by restructuring costs," said Matthew Clark, an analyst at Keefe, Bruyette & Woods, adding the underlying results looked pretty good.
Monday's profit announcement revealed earnings weighed down by charges to restructure the investment bank and integration costs for Deutsche Postbank and Sal. Oppenheim.
Ackermann said Deutsche Bank deliberately accelerated some spending on integration and infrastructure upgrades.
Deutsche Bank kept its dividend to shareholders unchanged at €0.75 per share, undershooting consensus for €0.82.
City A.M. Reporter