Deutsche Bank, Germany’s largest financial institution, has reported a 27% drop in profits for the second quarter due to high costs associated with restructuring and legal disputes. The bank’s net profit for shareholders amounted to 763 million euros, lower than the previous year. However, analysts had anticipated an even greater decline. Despite this, Deutsche Bank’s stock traded around 2% lower, making it one of the biggest losers on the Dax.
Anke Reingen, an industry expert from Canadian bank RBC, noted that earnings exceeded expectations, particularly in investment banking. The resumption of share buybacks was also seen as a positive sign. However, the gains were largely offset by the significant costs and increased provisions for potential loan losses.
Deutsche Bank attributed the decline in profits to special costs of 655 million euros related to restructuring the group and resolving past legal issues. On the other hand, the bank experienced a surprisingly strong increase in revenues, which had a positive impact on its overall performance.
The bank’s total income rose by 11% year-on-year to reach 7.4 billion euros, surpassing analysts’ average expectations. The Corporate Bank and the Private Clients Bank saw significant increases in pre-tax profit, compensating for a notable decline in the investment banking division.
The Corporate Bank contributed the largest share of pre-tax profit, with earnings rising by more than half to 670 million euros. In contrast, pre-tax profit in the investment bank plummeted by 44% to 576 million euros. The private clients bank also experienced a steep decline, generating 58% less profit than the previous year. The fund subsidiary, DWS, contributed one-third less profit compared to the second quarter of 2022.
During this period, Deutsche Bank allocated a total of 401 million euros for potential loan losses, representing a 72% increase compared to the same period last year. Despite these challenges, the bank posted its highest pre-tax profit since 2011 for the entire first half of the year, reaching nearly 3.3 billion euros. CEO Christian Sewing expressed confidence that the bank is well on track to achieve its 2025 targets.
Looking ahead, the bank’s management board expects the bank’s total earnings for the current year to fall within the upper half of the target range of 28 to 29 billion euros. There is no clear profit or return target for 2023, but CEO Sewing previously indicated a potential increase in pre-tax profit following the 5.6 billion euros achieved last year.
Deutsche Bank also reported its highest profit in 15 years in 2022, amounting to 5 billion euros. In addition to dividends already paid out, the bank plans to buy back its own shares worth up to 450 million euros between August and December. Overall, the bank intends to return over one billion euros to shareholders through dividends and share buybacks this year.
