Deutsche Bank Reports Sharp Rise in Profit but Broad Revenue Decline --2nd Update
July 27 2017 - 03:05AM
Dow Jones News
By Jenny Strasburg
Deutsche Bank AG's cost-cutting moves helped it beat analyst
expectations in the second quarter, but year-over-year revenue fell
in all three business divisions as its chief executive faces
pressure to revive results amid a broad restructuring.
The German lender said Thursday net income was EUR466 million
($548 million), compared with EUR20 million for the same period a
year earlier. Deutsche Bank's companywide revenues declined 10%
from the year-ago period, to EUR6.6 billion.
Dismal results in the bank's massive trading division show it
remains hobbled in the business it has long depended on most for
profits. Overall trading revenue across debt, interest rate
products, currencies and equities was down 18% last quarter.
And unlike big U.S. rivals, Deutsche Bank failed to get a bump
from clients' stock-trading last quarter. The German bank's
equities-trading revenue fell 28% year over year. Not enough hedge
funds and other clients have come back to the bank after a rocky
2016 to produce the volume of business it had a year ago.
Expectations for the quarter were modest, with analysts
projecting Deutsche Bank to manage a narrow profit of about EUR169
million, according to consensus estimates of 12 analysts compiled
by the bank.
Chief Executive John Cryan said in a statement Thursday that
"muted client activity in many of the capital markets" hurt
Deutsche Bank. Net revenues were down 16% in investment banking,
which includes deal-advising, securities issuance and trading. In
the private and retail-banking unit, net revenues fell 7%. Asset
management revenues dropped 4%, but that division earned higher
performance fees and would have shown a 7% revenue increase,
excluding a one-time accounting charge last year, Deutsche Bank
said.
The lender said clients continued to return to Deutsche Bank
last quarter, bringing EUR9 billion in net inflows across the
retail and private bank, wealth management and asset
management.
This time last year, clients were pulling money and business
from Deutsche Bank over concerns about big legal charges and its
capital cushion.
The lender is going through its second major restructuring in
less than two years, recombining its investment bank and trading
divisions and folding in a German retail-banking business,
Postbank, that it had intended to sell. It is now integrating
Postbank and has closed hundreds of bank branches as part of
broader cost-cutting moves.
Deutsche Bank brought on a new chief financial officer, former
Citigroup Inc. Treasurer James von Moltke, who started this month.
Ex-banker-turned-CFO Marcus Schenck is now overseeing the
recombined investment bank along with trading-unit chief Garth
Ritchie.
Mr. Cryan and his management team are under pressure to
rejuvenate Deutsche Bank's lagging revenues after raising EUR8
billion in capital from shareholders earlier this year.
The bank said it cut head count by almost 4,700 employees from a
year ago, to 96,652 full-time workers, as of the end of June. Its
noninterest expenses last year were down 15% from a year ago.
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
July 27, 2017 02:50 ET (06:50 GMT)
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