Deutsche Bank earnings higher than expected

Deutsche Bank 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 ($468 million) 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 US and Asia after recent attempts to restore profitability ended up eroding revenue.

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Deutsche Bank shares rose as much as 9.1 per cent on the news – the most since April 2017 – and were trading 7.3 per cent higher at €10.31 by late Monday morning in Frankfurt. The bank had been the worst-performing banking stock in Europe this year amid the tumult, down about 36 per cent.

Revenue

The lender said group revenue will be about €6.6 billion, with the corporate and investment bank accounting for about €3.5 billion of that figure. Those earnings include a €100 million 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 pull-back from various investment banking activities around the globe. He’s committed to cutting almost 10 percent of jobs, retrenching in costly trading businesses and effectively giving up on competing head to head with Wall Street firms.

“Management believes that these results demonstrate the resilience of the franchise,” Deutsche Bank said in the filing.

- Bloomberg