German financial giant Allianz kept its goal of ending a three-year losing streak at its banking business in 2004 but predicted group profits would decline in the second half.
"Profits from the sale of assets will flatten out so that you will have to expect slightly declining quarterly net profits in the rest of the year," Chief Financial Officer Helmut Perlet told reporters in a conference call on Monday.
Allianz, whose activities include insurance, banking and asset management, said second-quarter net profit came in at 614 million euros ($752 million), down 9 percent from the first quarter but better than the 589 million-euro market consensus.
Andreas Schaefer, a portfolio manager at Activest in Munich, said Allianz Chief Executive Michael Diekmann showed a strong record in achieving the realistic targets he set for the group, particularly regarding its stricken banking activities - home to problem child Dresdner Bank.
"I think he creates a lot of pressure internally for his targets to be met," said Schaefer, who holds Allianz stock in his portfolio. "The banking results looked surprisingly good and I think there is scope for loan-loss provisions to drop."
Munich-based Allianz has given investors a rough ride with its stock down around a quarter this year. The shares were up 2.6 percent at 76.35 euros by 1432 GMT, outperforming a nearly 1-percent rise in Europe's insurance sector.
Allianz is in the middle of a restructuring drive under Diekmann, who took over last year as the group's big losses in banking combined with the impact of years of poor stock markets forced it to make huge writedowns on its investments.
"These results show that the group's recovery is now solid and well founded. The only area still requiring major improvement remains the bank," analysts at Swiss bank Pictet noted.
Its banking division - a major concern for investors - contributed to group profits for a second consecutive quarter with a net profit of 127 million euros, after multibillion losses in the three years since Allianz acquired it.
However, banking results were flattered by a 190 million- euro gain in the second quarter from the sale of a stake in leading Spanish broadcaster Telecinco in June.
Finance chief Perlet said banking results after the first six months had made its breakeven forecast look conservative but that he would hold back a possible upward revision until the end of the third quarter, which is traditionally the weakest for banks.
He declined to give an outlook for 2004 group profits.
Allianz said its quarterly net premium income, or revenues from selling products such as insurance policies to clients, was 13.78 billion euros, slightly higher than last year's.
"We still expect total premium income to increase by some 4 percent (in 2004)," Allianz said in its first-half report.