Deutsche Bank performs above expectations

Deutsche Bank announced its second-quarter financial results on Wednesday, revealing a net profit of €763 million ($842 million). Despite beating analysts’ predictions, the net profit figure marked a 27% year-on-year decline. The bank’s net profit, attributable to shareholders, slightly exceeded the Reuters poll’s forecast of €737 million but significantly dropped from the €1.046 billion reported in the same quarter of 2022. However, net revenues saw an 11% year-on-year increase, reaching €7.4 billion.

Nonetheless, the bank’s non-interest expenses for the second quarter rose by 15% year-on-year to €5.6 billion, with adjusted costs increasing by 4% to €4.9 billion. The non-operating costs included €395 million in litigation charges and €260 million related to “restructuring and severance execution of strategy.”

The corporate and private banking divisions of Deutsche Bank performed well during the quarter, with revenues rising 25% and 11% year-on-year, respectively, benefiting from the higher interest rate environment. However, divisions more closely tied to the financial market backdrop, such as investment banking and asset management, experienced revenue declines of 11% and 6%, respectively.

Deutsche Bank CFO James von Moltke explained that the decrease in these divisions’ revenues could be attributed to an unusually strong second quarter in 2022, where market volatility boosted trading volumes and revenues.

In response to inflation, the bank increased its target for cost savings from €2 billion to €2.5 billion. Additionally, Deutsche Bank is making substantial business investments to support future revenue growth, improve technology, and enhance controls.

Deutsche Bank’s second-quarter performance marks a 12th consecutive quarterly profit since completing its restructuring plan in 2019, aimed at cutting costs and enhancing profitability. The bank’s CEO, Christian Sewing, expressed confidence in the positive momentum and resilience demonstrated across its diversified business portfolio and towards achieving its 2025 financial targets.

Furthermore, Deutsche Bank announced plans for share buybacks, aiming to initiate up to €450 million in buybacks starting in August, with total capital returned to shareholders through dividends and buybacks expected to exceed €1 billion in 2023, compared to around €700 million in 2022.

The bank also indicated potential benefits from the collapse of Credit Suisse and its takeover by UBS. Deutsche Bank has already seen some positive effects, having attracted talent in the wealth management and origination and advisory franchises. CFO von Moltke expressed confidence in attracting strong talent and leveraging the bank’s platform and market presence.