Deutsche Bank reports third-quarter results, beats expectations

Deutsche Bank on Wednesday reported results for the third quarter (July-September), with a profit of 182 million euros ($214 million). A year ago, the bank posted a net loss of 832 million euros as a major restructuring plan weighed on earnings.

The German lender’s third-quarter results beat analysts’ expectations of a 114 million euro loss. There was also a sharp improvement from the net loss of 77 million euros in the second quarter. Its provision for bad loans was 273 million euros, in addition to the 761 million euro bad loan provision in the second quarter and 506 million euros in the first quarter.

The bank saw strong performance in its investment bank, with net revenues rising to 2.4 billion, up 43% year-on-year. Its Fixed Income & Currencies (FIC) division saw a 47% growth.

“We are now very focused on the businesses where we can compete and win, and where our businesses and our clients and our people know where we are focused and where we can really be competitive, so I think we are seeing the benefits of that focus,” said Deutsche Bank CFO James von Moltke.

The CFO also estimated that nearly half of the quarter’s revenues would be sustainable through the bank’s market share recovery and strengthen the businesses, with investment banks greatly benefitting from the increased market volatility. The investment banks that benefit will be those with major lenders.

“In the fifth quarter of our transformation, we not only demonstrated continued cost discipline, but also our ability to gain market share,” said the bank’s CEO, Christian Sewing, in a statement. “Our more focused business model is paying off and we see a substantial part of our revenue growth as sustainable.”

Highlights

·        Total net revenue: 5.9 billion euros, vs 5.3 billion euros a year ago

·        Common equity tier 1 capital ratio: 13.3%, vs 13.4% a year ago

·        Total non-interest expenses: 5.2 billion euros, vs 5.8 billion in the third quarter of 2019

Before the report, shares of Deutsche fell at the start of Wednesday trading session, but rose 3% by late morning. Its stock is currently up more than 17% year-to-date after it recovered from a sharp decline in March due to the coronavirus economic crisis.

JPMorgan called the bank’s third-quarter results a “positive surprise” after previously projecting a quarterly loss.

Analysts at Citi also said the quarter had a “good set of results” but remained doubtful about the stocks. They believe “the investment bank industry backdrop is unlikely to be as supportive” for Deutsche Bank in 2021.

The bank has been on a mass restructuring mission since last year to cut costs and restore long-term profitability. Over the past five years, Deutsche Bank has lost a lot of money, and this quarter has signaled a recovery for the bank.

Analysts say that there are good signs of recovery but the uncertainties surrounding the current health and economic crisis still remains a huge concern.