Deutsche Bank continues its series of quarterly profits – despite lower income in bond trading and corporate business. The largest German financial institution has cut risk provisioning sharply.
Deutsche Bank posted its fourth consecutive quarterly profit between April and June. The bottom line is that it generated a surplus of 692 million euros, after a loss of 77 million euros a year ago. Analysts had expected less. The institute benefited from the fact that loan defaults as a result of the Corona crisis were lower than feared. This enabled the provision to be reduced from 733 million euros to 99 million euros. In addition, the bank has cut its spending.
However, the balance sheet was again burdened by the losses (258 million euros) of the “Capital Release Unit” called Bad Bank, in which the bad loans from the financial crisis are parked and gradually sold. The bank also points out that the quarterly profit would have been even higher if the ruling by the Federal Court of Justice (BGH) in April 2021 for the approval of customers to price changes had not reduced the result by 226 million euros.
Sewing confirms return target
CEO Christian Sewing said the bank is well on the way to achieving its target return of eight percent in the coming year. “All business areas have become more profitable and have proven that we continue to gain relevance for our customers and gain market share.” The bank is also confident in terms of earnings. They should be closer to 25 billion euros in the next year than the targeted 24.4 billion.
In the second quarter just ended, however, revenues declined. As the balance sheets of the major US banks have already shown, investment banking, which is so important for Deutsche Bank, was affected. Here, income fell by eleven percent compared to the previous year to 2.4 billion euros. In the fixed income and currency business, where Deutsche Bank is one of the world’s largest traders, they also fell by eleven percent. Nevertheless, earnings before taxes increased by seven percent to one billion euros, thanks to the lower risk provisioning and an iron cost discipline. This means that investment banking remains by far the largest profit maker for Deutsche Bank.
In the corporate customer business, too, income fell by eight percent year-on-year to 1.2 billion euros. In the private customer bank and in asset management, income increased thanks to the bubbling administration fees. However, profits in these areas remained modest. The adjusted profit before taxes in the private customer business was just 87 million euros. Unadjusted, there was even a loss of eleven million euros. In the corporate banking business, a pre-tax profit of 246 million euros was achieved, a quarter of the result in investment banking.