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Half-year profit: Deutsche Bank delights investors

2021-07-28T09:10:46.692Z


Deutsche Bank makes positive headlines - that would be worth reporting. But there is more to it than that: Progress in restructuring, return targets within reach - and unexpectedly high profits.


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Deutsche Bank boss Sewing: Conversion is progressing

Photo: RALPH ORLOWSKI / REUTERS

At Deutsche Bank, confidence has grown after the most successful half-year since 2015. The group restructuring is progressing, costs are falling and CEO Christian Sewing expects significantly fewer loan defaults due to the corona crisis than previously estimated. "The pre-tax profit of 1.2 billion euros in the second quarter confirms: We are well on the way to our return target of eight percent for the coming year," said Sewing on Wednesday in Frankfurt am Main. In addition, the bank has fared significantly better than analysts expected in the past few months.

The news was very well received on the financial market. Shortly after the start of trading, the Deutsche Bank share rose 3.7 percent as the DAX front runner and thus also surpassed the 11 euro mark. Industry experts were positively surprised by the quarterly figures. Analyst Andreas Pläsier from Warburg Research now expects higher income in investment banking and lower provisions for loan losses than before.

After taxes, Deutsche Bank earned 828 million euros in the months from April to June.

Minority interests and interest payments for certain bonds still have to be deducted from this, so that the bottom line was a profit of 692 million euros for the shareholders.

A year earlier, the bottom line was a minus of 77 million euros in the interim balance.

Now there was a net profit of 1.6 billion euros in the books in the first half of the year.

All business areas more profitable

"As in the first quarter, all of our business areas were more profitable than last year," Sewing noted.

At 7.8 percent, the return on material equity was just below the target of 8 percent set for 2022.

The earnings of the group - that is, the total revenue - were just over 6.2 billion euros, however, just below the total for the same quarter of the previous year.

This was mainly due to declines in the investment division.

A year earlier, this area had benefited from the turbulence on the financial markets at the beginning of the corona crisis.

In the private customer business, on the other hand, Deutsche Bank was able to increase its income by three percent, although the ruling by the Federal Court of Justice (BGH) on bank charges had a negative impact.

The BGH ruled at the end of April that banks must obtain the consent of their customers in the event of changes to general terms and conditions.

Many fee increases have therefore been suspended for the time being, and bank customers can also claim back some of the fees that have been paid too much.

Many banks are putting money aside for this.

Remodeling is progressing

Meanwhile, Germany's largest financial institution is making progress with the renovation, including cutting thousands of jobs. According to the institute, 90 percent of the estimated costs of 8.1 billion euros have now been processed. The adjusted costs excluding renovation costs fell year-on-year by six percent to 4.6 billion euros. In the same period, the Dax group cut a good 3,000 full-time positions, so that at the end of June, just under 84,000 full-time employees were still working at the bank.

"Now it is important that we continue our renovation in a disciplined manner," explained Sewing. "We have to stay on the ball with all the cost factors that we can influence ourselves." However, from now on the board of directors no longer wants to focus on a fixed cost target, but on the relationship between expenditure and income. The group’s costs are expected to drop to 70 percent of income by 2022. So far, Sewing had set a cost target of 16.7 billion euros. If the bank now beckons additional income, the costs should also be allowed to be higher.

In fact, the top Deutsche Bank expects higher income for this year and next than was forecast in December.

In doing so, she assesses a “considerable part” of the growth since 2019 as sustainable.

In addition, the Board of Management believes that the burdens caused by the low interest rates should gradually decrease in the coming quarters.

Less loan defaults

Deutsche Bank is also benefiting from the fact that the economic environment is stabilizing.

The management expects significantly fewer loan defaults than expected a few months ago: the risk provision for endangered loans this year should only make up 0.2 percent of the loan volume, it said.

This corresponds to around 900 million euros, said CFO James von Moltke.

If the economy develops better, it can also become less.

At the end of April, the manager had expected 1.1 to 1.2 billion euros.

In the Corona year 2020, Deutsche Bank had set aside around 1.8 billion for possible loan defaults.

In the first half of 2021, however, it was only 144 million euros.

Deutsche Bank can also use the relief and the additional income.

The board of directors expects an additional burden of 400 million euros for the European bank resolution fund and the statutory deposit insurance in Germany.

The latter had recently been heavily burdened by the bankruptcy of the Greensill Bank in Bremen.

mik / dpa-AFX

Source: spiegel

All business articles on 2021-07-28

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