Despite losses in Q2, Germany's leading bank remains optimistic and expects positive results this year. The bank highlights the performance of its investment banking business, and points out that risk provisions are lower than expected.
Provisions for credit losses of 761 million euros
Despite posting a Q2 loss of $90.3 million "exceeding analysts' expectations", the German giant is optimistic, with pre-tax profits of 158 million euros between April and June 2020.
The Covid-19 crisis has forced the bank to increase its provisions for potential credit losses to 761 million euros (versus 506 million euros in Q1), as well as its provisions for investment banking. Nevertheless, its figures remain lower than those revealed by other European groups. At the end of July, Barclays, for example, announced that it had set aside £1.6 billion (€1.76 billion) in provisions to cover the risk of default. Santander, meanwhile, posted a record net loss of over 11 billion euros in Q2, due to a massive provisioning charge linked to the coronavirus.
A vast restructuring plan
Deutsche Bank has launched an extensive restructuring plan following annual losses over the last 5 years. Nevertheless, the bank's executives have declared that the performance recorded in the first half of the year is unlikely to be repeated: even in the event of a "second wave" of epidemics, "the authorities will not shut down the economy like they did the first time". The bank also notes that, in recent months, loan repayment rates have been higher than anticipated and demand for state-guaranteed loans lower than expected.
"The fruits of all our hard work are already beginning to be felt," said Christian Sewing, Chairman of the Management Board, in a memo to staff, while recalling the scale of the restructuring launched in 2019. Indeed, 50% of the cost-cutting plan has already been implemented, and a third of the 18,000 job cuts announced have been carried out.
Investment banking results up sharply
Deutsche Bank's optimism is further underpinned by the investment bank's results, which continue the momentum of the first 3 months of the year. Revenues rose by 46% in Q2, to €2.7 billion, while foreign exchange activities increased by 39% due to the volatility induced by the health crisis. " It looks like Deutsche Bank has come back from hell", says Octavio Marenzi, managing director of consulting firm Opimas.