Deutsche Bank earned significantly more in the second quarter with 1.2 billion euros than was expected on the market.

The share price jumped 4 percent to over 11 euros in early business, later leveling off at 10.66 euros close to the previous day's close.

On average, analysts had expected pre-tax profits to be almost a third lower in their forecasts.

Markus Frühauf

Editor in business.

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The CEO Christian Sewing assessed the repeated billion profit in a three-month period as gratifying. In his letter to employees, he wrote that he had already achieved a lot in transforming the bank. "But it's a bit like running a marathon: At 30 kilometers it starts to get particularly strenuous."

He canceled the cost target for 2022, which had been reduced from 17 to 16.7 billion euros on Investor Day in December.

Instead of an absolute cost target, Sewing is aiming for a cost-income ratio of 70 percent in the coming year.

This means that Deutsche Bank has to spend 0.70 cents for every euro it generates.

According to Sewings, this key figure better reflects the targeted sustainable market.

“The cost-income ratio is also crucial in order to achieve our central goal for the coming year: a return of eight percent on material equity.

We reaffirmed both target quotas today, ”Sewing explained to the employees about the direction of the move.

Confidence in returns

The bank has also become more ambitious in terms of earnings. In the first half of the year these increased by 7 percent to 13.5 billion euros compared to the same period last year. The bank is now expecting income in the coming years that is likely to exceed the 24.4 billion euros that has been targeted so far. Without going into more detail, CFO James von Moltke said on the conference call that this could be closer to 25 billion euros in the coming year.

After the supervisors of the European Central Bank (ECB) will lift the strict dividend rules from September, Deutsche Bank is preparing for the first profit distribution in two years. In the second quarter, 274 million euros were set aside for the dividend. After EUR 300 million in the first quarter, a total of EUR 574 million has now been set aside for the dividend for the current financial year. At the investor's day in December, the management board had given a somewhat vague prospect of returning equity of 5 billion euros to shareholders from 2022. The bank still leaves open the period to which the amount relates and how much of it is for dividends and share buybacks.

After tax, Deutsche Bank earned 828 million euros between April and the end of June.

Minority interests as well as interest payments for certain bonds have to be deducted from this, so that the shareholders' bottom line is a profit of 692 million euros.

A year ago there was a deficit of 77 million euros.

After six months, the net profit attributable to the shareholders is 1.6 billion euros after minus 120 million euros in the same period of the previous year.

It's the best half of the year since 2015.

BGH judgment burdened with 222 million euros

Sewing was very satisfied with the development of the individual business areas, all of which - as in the previous quarter - became more profitable. In the private customer business, the ruling by the Federal Court of Justice (BGH) on bank fees burdened the result with a total of 222 million euros, so that a loss of 11 million euros was incurred in the second quarter. Adjusted for this, it would have been a profit of 87 million euros after a loss of 257 million euros in the same period of the previous year.

The BGH ruled at the end of April that banks must obtain the consent of their customers for changes to general terms and conditions. Many fee increases are therefore suspended for the time being, and bank customers can also claim back some of the fees that have been paid too much. Deutsche Bank set aside 128 million euros for legal disputes. She lost 94 million euros in income because of the judgment.

The corporate bank earned 246 million euros in the quarter under review, more than three times as much as twelve months earlier. The investment bank outperformed its international competition in the bond business. Fixed income and currency (FIC) trading revenues fell 11 percent to 1.8 billion euros, but American banks reported more pronounced declines. In the same quarter of the previous year, the bond business was very brisk because states had to finance their aid packages for the corona pandemic.

In the most profitable division, the bank achieved a 7 percent higher profit of 1.0 billion euros. The investment bankers increased their advisory revenues by more than 100 percent, as there was significantly more corporate activity in mergers and acquisitions. In asset management, for which the investment company DWS is responsible, new funds of 20 billion euros flowed in, which is a record value. Since the end of the second quarter of 2020, net inflows totaled 45 billion euros. The assets under management rose in the second quarter by 39 billion to 859 billion euros.