Deutsche Bank warns on outlook

FRANKFURT: Deutsche Bank AG just keeps shrinking.

Europe’s largest investment bank reported a 10% decline in second-quarter revenue to 6.62 billion euros (US$7.78bil), the weakest quarter in 3 ½ years. Earnings at the reorganised investment banking unit slumped 16% as trading and transaction banking income fell, and the bank cautioned that revenues of its operating businesses will decline this year.

The shares fell the most in more than four months. “Revenues were not as universally strong as we would have liked, in large measure because of muted client activity in many of the capital markets,” chief executive officer John Cryan said in a statement.

Cryan said in March, when he announced the bank’s third turnaround plan in as many years, that he’s trying to restore “modest growth” by pivoting the investment bank to corporate clients and emphasizing Deutsche Bank’s German roots. The lender last year posted the weakest annual revenue since 2010 as clients fled amid concern the bank may struggle to pay misconduct fines. Cryan this year raised eight billion euros to try and put those worries to rest.

“The revenue miss shows that it’s taking Deutsche Bank longer than expected to regain market share,” said Markus Riesselmann, an analyst with Independent Research who has a buy recommendation on the stock. “But lower credit loss provisions and progress on cost cuts helped the bank achieve a bet- ter-than-expected profit.”

Deutsche Bank’s revenue fell short of the 7.1 billion-euro average estimate by six analysts surveyed by Bloomberg. Net income of 447 million euros beat the analysts’ 311 million-euro estimate. Estimates for net income ranged from a loss of 185 million euros to a profit of 550 million euros.

Deutsche Bank fell as much as 4.7%, the most since March 6, and traded 3.6% lower at 16.01 euros at 9:04 a.m. in Frankfurt. Before today, the stock had rebounded about 76% from a record low in September, when speculation about its capital position peaked.

At the investment banking unit, fixed-income trading declined 12% and revenue from equities trading fell 28%. — Bloomberg