Deutsche Bank quarterly results top estimates considerably
FRANKFURT: Deutsche Bank AG surprised investors with second-quarter earnings that were higher than analysts had expected, driving one of Europe’s worst-performing bank stocks up the most in more than a year.
The Frankfurt-based bank sees net income of about 400 million euros (US$468mil) and income before income taxes of about 700 million euros, “considerably” above estimates. The preliminary results – nine days before its official earnings date – were published according to regulatory guidelines.
The earnings surprise is a rare piece of good news for Deutsche Bank investors that have seen the shares trading at a record low, a tumultuous management reshuffle and plan to reduce its global presence in its fourth major strategic overhaul in three years.
New chief executive officer Christian Sewing is cutting thousands of jobs and paring back businesses in the United States and Asia after recent attempts to restore profitability ended up eroding revenue.
Deutsche Bank shares rose as much as 9.1% on the news – the most since April 2017 – and were trading 7.3% higher at 10.31 euros in Frankfurt. The bank had been the worst-performing banking stock in Europe this year amid the tumult, down about 36%.
Group revenue would be about 6.6 billion euros, with the corporate and investment bank accounting for about 3.5 billion euros of that figure.
Those earnings include a 100 million euro gain on an asset sale and debt valuation adjustments reflecting a widening of Deutsche Bank’s credit spreads during the quarter.
“It’s not entirely clear where the beat is coming from, but if it’s mostly from widening credit spreads, then it’s probably not sustainable,” said Markus Riesselmann, an analyst with Independent Research who has a “sell” recommendation on the bank’s stock.
“In fact, trading revenue seems to have decreased more than forecast, indicating that the bank still has a long way to go.”
Sewing, who took over in April, is accelerating cost cuts and a pullback from various investment banking activities around the globe.