By Eyk Henning
FRANKFURT-- Deutsche Bank AG said Thursday that it more than
tripled second-quarter net profit on better-than-expected
investment banking revenue and lower taxes, but warned that
challenges remain.
Germany's biggest lender said net profit jumped to EUR796
million ($873.52 million) from EUR237 million a year earlier.
Revenue rose to EUR9.2 billion from EUR7.86 billion while the
bank's tax rate fell to 33% from 74% a year earlier.
Analysts on average expected net profit of around EUR721 million
on EUR8.7 billion in revenue, according to a consensus forecast
provided by the bank.
Deutsche Bank's revenue had an unexpected lift in the quarter
from its massive debt and equity trading operations, as well as
from its asset and wealth management business.
Its shares were buoyed by the figures, rising more than 3% in
early trading.
"Solid revenue growth underscores the fundamental strengths of
our businesses... However, our challenges are also evident in the
unacceptably high level of our costs, our continuing burden of
heavy litigation charges, a balance sheet that must be more
efficient, and the poor overall returns to our shareholders," said
the bank's new co-Chief Executive John Cryan, who replaced Anshu
Jain on July 1. Fellow co-CEO Jürgen Fitschen is due to leave his
post next May.
Mr. Jain and Mr. Fitschen had faced mounting criticism from
shareholders following the lukewarm reception of the bank's new
strategic plan which some said lacked detail.
The lender was also slammed by regulators after shelling out a
record $2.5 billion fine in the first quarter to settle with
authorities over attempts to manipulate interest rates.
Mr. Cryan has pushed back an eagerly awaited detailed
presentation of Deutsche Bank's new strategy to October from July.
"We must critically review any countries, business lines, products,
and relationships that are unattractive," he said Thursday.
Like many of its large rivals, Deutsche Bank is under
investigation for allegedly rigging foreign exchange markets, or
high frequency trading.
Its litigation-related costs rose to EUR1.2 billion in the
second quarter from EUR470 million a year earlier. The majority of
the new costs are provisions "related to legacy U.S.
mortgage-related matters," the bank said.
The lender's large investment banking business posted EUR1.2
million in pretax profit for the second quarter compared with
EUR885 million a year earlier and against analysts' expectations of
EUR1 billion.
Investment banking revenue rose 23% to EUR4.3 billion from
EUR3.5 billion the year before.
Elsewhere in Europe, second-quarter investment banking revenue
at UBS AG and Credit Suisse rose slightly while being stable at
Barclays PLC.
Revenue at Deutsche Bank's fixed-income and currency, trading
operations rose 6% amid stronger foreign exchange activities, while
equity trading revenue was up 40%. The major five U.S. investment
banks saw FICC revenue--which includes the commodity business
Deutsche Bank has exited--decline 4.3% year-on-year.
Deutsche Bank's other three main operating units--retail
banking, transaction banking and asset and wealth management--all
boosted pre-tax profit, with wealth management, in particular,
beating expectations.
Write to Eyk Henning at eyk.henning@wsj.com
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