Germany's biggest bank, Deutsche Bank AG, posted the strongest first-quarter profit in its 137-year history on Tuesday -- a 29 percent increase over the same quarter last year -- beating analysts' estimates as well as its own declared forecasts.

Deutsche Bank is "wonderfully positioned," said CEO Josef Ackermann. Net income rose to €2.12 billion ($2.89 billion) from €1.64 billion in the first quarter of 2006. A full 70 percent of the profit came from Deutsche Bank's investment banking unit, which took advantage of a correction in debt and equity markets at the beginning of the year, unlike some European rivals like UBS AG and Credit Suisse Group.

"Despite the ongoing correction in the housing market," Ackermann told shareholders, "the United States economy remains fundamentally resilient. Growth momentum and business confidence in Europe appear solid and sustained strength and optimism in the German economy continues to contribute positively to the performance of the euro zone."

Weaknesses in some businesses

Some analysts worried that Deutsche Bank's spectacular investment-banking profits would obscure weaknesses in other areas, like consumer banking, where profits fell 3 percent (because of two big acquisitions, Norisbank and Berliner Bank), or asset and wealth management, where earnings fell 19 percent.

"The lower-than-expected profits in the non-investment banking divisions may take some of the shine off the very strong investment banking results," Credit Suisse analyst Ivan Vatchkov wrote in a letter to his clients. "This may revive investor concerns that Deutsche is overly dependent on investment banking."

Deutsche Bank believes it's well-positioned to weather a season of mergers in European investment banks. "The continuing consolidation of our sector, which includes cross-border mergers in Europe, may change the intensity of competition," said Ackermann. "We are confident that Deutsche Bank is well-equipped to master these challenges." He said the center of the bank's strategy would stay the same -- to expand "organically and through targeted subsidiary acquisitions."