Posted on Jul 28, 2021, 12:22 PMUpdated on Jul 28, 2021, 2:22 PM
The shock of the pandemic was less severe than expected. Deutsche Bank once again posted good results in the second quarter. Between April and June, it made a profit of 692 million euros, after tax and deduction of interest on subordinated bonds. This is less than the billion posted at the start of the year but much more than the 77 million losses recorded a year ago.
The bank exceeded analysts’ expectations, in particular because loan defaults linked to the health crisis were lower than they expected. New provisions for losses on these loans were 75 million euros, 90% less than in 2020. Income fell “only” by one percent, to 6.2 billion euros. euros.
Reversing the trends of the previous quarters, activities with individual customers grew by $ 14 billion. On the other hand, the investment bank which had benefited from the intense activity on the financial markets at the beginning of the pandemic, recorded in the spring a fall of 11% of its revenues, to 2.4 billion. While it was at the heart of Deutsche Bank’s restructuring plan, its investment bank has also seen its revenues decrease by 8% since 2020, to 1.2 billion.
Overall, the four divisions are performing better than expected, said CFO James von Moltke on a conference call Wednesday. He remained cautious for the whole year.
Deutsche Bank will in particular have to adjust its provisions to take into account a ruling by the German Supreme Court prohibiting price increases without the customer ‘s explicit agreement. It has already forced the first German bank to set aside 130 million euros for the current quarter, pending future customer complaints.
These additional costs are in addition to contributions higher than expected by the bank to the European resolution fund and the legal deposit guarantee in Germany, burdened by the bankruptcy of the Greensill Bank. Taking into account the new provisions, the bank reduced its costs overall by 7% to 5 billion euros during this quarter.
Despite these constraints, optimism remains in order for a bank that has come a long way. “All sectors of activity have become profitable,” notes its chairman Christian Sewing. He therefore believes that the first German bank is “on track” to reach the 8% return target in 2022 “, against the current 6.5%, set when adopting a vast restructuring plan there. is two years old.
Last kilometer of a “marathon”
The race is far from over, recognizes Christian Sewing. As in a marathon, “it is at kilometer 30 that the race begins to be particularly trying,” he wrote to his employees. The workforce, which must already go from 84,000 full-time jobs currently to 74,000 in 2022, should be further “optimized” and the housing stock reduced.
The bank has abandoned the move to base its strategy on cost figures alone to focus on the concept of costs / income, said James von Moltke on Wednesday. A ratio that should increase to 70% within a year, he discounted, against more than 80% currently.