TAKING THE PULSE: German banks' first-quarter results are likely to show a continuing burden from painful asset mark-downs related to the broadening global economic crisis. However, Deutsche Bank AG's (DB) securities business should at least provide a glimmer of hope, in line with some of its U.S. and Swiss peers who surprised the market with better-than-expected first-quarter results, particularly in fixed income.

In the first quarter, German bank M&A progressed with Deutsche Bank taking a 25%-plus-one-share stake in Deutsche Postbank AG (DPB.XE), and Commerzbank AG (CBK.XE) finalizing the acquisition of Dresdner Bank from Allianz SE (AZ).

In order to finance the EUR4.7 billion Dresdner acquisition, Commerzbank had to tap the German government's SoFFin financial markets stabilization fund. It still awaits the European Commission's final approval on the government's planned capital support, which includes the government taking a 25%-plus-one-share stake in Commerzbank and a EUR16.4 billion silent participation, plus EUR15 billion in state guarantees.

COMPANIES TO WATCH:

---Deutsche Bank AG (DB)---(Tuesday April 28)

MARKET EXPECTATIONS:After Goldman Sachs (GS) and Credit Suisse's (CS) upbeat first-quarter results and Deutsche Bank's positive guidance, analysts expect to see some improvement at Germany's largest listed bank by market value as well.

A Dow Jones Newswires poll of 15 analysts gave an average first-quarter net profit forecast of EUR764 million, bouncing back from a net loss of around EUR131 million in the same quarter a year ago. The result should be helped by substantial improvements in the bank's trading result net interest income.

"Deutsche Bank heavily advertised a strong start into 2009 and after the good result of the U.S. banks, expectations for first-quarter earnings are high," writes Kepler Capital Markets analyst Dirk Becker.

In the bank's annual report, Chief Executive Josef Ackermann said: "Deutsche Bank expects to return to profitability in 2009" if "the global economy, financial markets, legal and regulatory environment, and competitive environment develop as foreseen."

Citi Investment analysts noted that Deutsche Bank management said the bank had EUR2.8 billion of revenue in January, a similar trend in February and solid operating revenue in March.

MAIN FOCUS: Kepler's Becker expects the underlying result to be strong "on the back of record new bond issuance and wider bid-ask spreads in the fixed-income space." However, he also cautions that "the bottom line might disappoint" as the results will be dragged down by write-downs.

The bank's exposure to monoline insurers will likely require further mark-downs following ratings downgrades of MBIA and Ambac earlier this year. "Deutsche Bank has been far less aggressive than its peers for value adjustments in this field and might have to catch up now," Kepler's Becker writes. Keefe, Bruyette & Woods analysts expect EUR1.2 billion quarterly mono-line related write-downs. Weaker revenue from asset and wealth management, impairments on infrastructure investments and further injections into money-market funds could also hamper earnings, the analysts write.

"We worry that underlying client activity levels remain subdued in many areas of the business, and some of the first-quarter positives may prove temporary," Citi Investment analysts said.

Comments about the bank's capitalization will be closely watched. Deutsche Bank has repeatedly said it's on track for its target of a Basel II Tier 1 capital ratio of around 10%, without needing to raise external capital. But analysts such as from Sal. Oppenheim perceive Goldman Sachs' recent announcement of a capital increase - despite a Tier 1 ratio of around 13.4% after the payback of $10 billion government capital - as suggesting enhanced pressure for higher capital-ratio standards for the entire sector.

---Deutsche Postbank (DPB.XE)---(Tuesday May 5)

MARKET EXPECTATIONS:Deutsche Postbank AG (DPB.XE) CEO Wolfgang Klein told the annual general meeting this week that the bank expects an after-tax profit for the first quarter, helped by a three-digit-million euros tax boost, but also due to cutting risk positions. Klein also said the bank expects further impairments this year, the bulk of which would be incurred in the first half.

MAIN FOCUS: Analysts to eye more details on the bank's impairments, and on cost and revenue synergies to expect from tie-up with Deutsche Bank.

---Commerzbank AG (CBK.XE)---(Friday May 8)

MARKET EXPECTATIONS: The bank is expected to announce further, limited, crisis-related write-downs, to give an update on the integration of Dresdner Bank, which it bought in January for EUR4.7 billion, and on its capitalization.

MAIN FOCUS: Special attention will be given to an update on the talks with the E.U. Commission and conditions it may impose to approve government aid. A required sale of Eurohypo, departure or reduction of Eastern European operations, and a sale of smaller units such as private bank Reuschel, and operations in Switzerland and Luxembourg, have been speculated in recent press reports.

-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500; ulrike.dauer@dowjones.com