Deutsche Bank beats expectations despite 27% drop in profit, jump in costs

Deutsche Bank on Wednesday reported a net profit of 763 million euros ($842 million) for the second quarter of 2023, narrowly beating expectations despite a 27% year-on-year decline.

The bank’s net profit attributable to shareholders slightly topped a prediction of 737 million euros in a Reuters poll of analysts, though marked a significant drop from the 1.046 billion euros reported in the same quarter of 2022, while net revenues rose 11% year-on-year to 7.4 billion euros.

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However, second-quarter non-interest expenses rose 15% year-on-year to 5.6 billion euros, with adjusted costs up 4% to 4.9 billion euros. Nonoperating costs includes 395 million euros in litigation charges and 260 million euros in “restructuring and severance related to execution of strategy.”

In its first-quarter report, the bank flagged job cuts for its non-client facing staff and reported a sharper-than-expected year-on-year fall in investment bank revenues.

Wednesday’s result marked a 12th straight quarterly profit since the German lender completed a sweeping restructuring plan that began in 2019 with the aim of cutting costs and improving profitability.

“In the first half of 2023 we again demonstrated good growth momentum across a diversified business portfolio, underlying earnings power and balance sheet resilience. This puts us on a good track towards our 2025 financial targets,” said Deutsche Bank CEO Christian Sewing.

“Our planned share repurchases enable us to deliver on our goals to distribute capital to our shareholders.”

Deutsche Bank announced on Tuesday that it plans to initiate up to 450 million euros of share buybacks this year, starting in August, and expects total capital returned to shareholders through dividends and buybacks in 2023 to exceed 1 billion euros, compared with around 700 million in 2022.

Other highlights for the quarter:

• Total revenues stood at 7.4 billion euros, up from 6.65 billion in the second quarter of 2022.
• Total non-interest expenses were 5.6 billion euros, up 15% from 4.87 billion a year earlier.
• The provision for credit losses was 401 million euros, up from 233 million in the same quarter of last year.
• Common equity tier one CET1 capital ratio, a measure of bank liquidity, rose to 13.8% from 13.6% in the previous quarter and 13% a year ago.
• Return on tangible equity stood at 5.4%, down from 7.9% a year ago.

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