The largest German bank has presented the eighth quarterly profit in a row despite a difficult environment of recession worries, inflation and the impending gas crisis. Compared to the previous year, Deutsche Bank increased its profit significantly by more than half to 1.05 billion euros. On average, analysts had only expected a net profit of 788 million euros.
"The private customer and corporate banks are developing particularly well," said Deutsche Bank boss Christian Sewing. "Thanks to our successful transformation, we are well on the way to being well diversified and sustainably profitable with our four strong business areas." On the stock exchange, investors reacted cautiously to the numbers, Deutsche Bank shares were up to 1.0 percent lower in the morning.
Question marks behind the annual targets
For Deutsche Bank, it is the strongest half-year and second quarter since 2011. The bank intends to stick to its goal of achieving an after-tax return of eight percent for the current year. However, it has become more difficult to achieve these goals.
"We now have more challenging months ahead of us," Sewing wrote in an employee letter. "There is much to suggest that it will become even more difficult economically." In the second quarter, the after-tax return was 7.9 percent compared to 5.5 percent in the same period last year.
One of the biggest challenges is the increased risk of loan defaults: the bank increased its provisions to EUR 233 million. This is more than twice as much as in the same quarter of the previous year, when risk provisions were still EUR 75 million.
Risk to Russia reduced
For the year 2022, Deutsche Bank confirmed the goal of achieving earnings of 26 to 27 billion euros. This applies even though the macroeconomic environment deteriorated in the second quarter and the bank expects a challenging second half of the year, it said when the figures were published.
Deutsche Bank reduced its financial risk to Russia by 42 percent to EUR 0.6 billion. Inflation and exchange rate fluctuations led to an increase in adjusted costs by two percent to 4.7 billion euros.
CET 1 capital ratio increased
The bank is therefore somewhat less optimistic about the development of the relationship between expenses and income. In the current year, this will be in the low to mid 70s percentage range. So far, the bank had promised a rate of 70 percent. In the second quarter, the ratio improved to 73 percent, after having been 80 percent in the same period of the previous year.
In investment banking, profits increased according to forecasts by just one percent to 1.1 billion euros. The Group's total income increased by around seven percent to EUR 6.65 billion in the second quarter. The CET1 capital ratio rose to 13 percent from 12.8 percent during the quarter.
Banks with profit slumps
It was only on Tuesday that Deutsche Bank's competition from Switzerland, UBS, presented its figures and recorded the highest quarterly profit in ten years. In the United States, however, where the big banks opened their books earlier, the heavyweights in the financial sector were already reporting slumps in profits. The largest bank in the US, JPMorgan, reported a 28 percent drop in profits to $8.6 billion. At $3.1 billion, Wells Fargo earned nearly 50 percent less than the same period a year ago. And Citigroup's profits fell 27 percent to $4.5 billion.