German lender more than doubles quarterly net income after a difficult 2016
Deutsche Bank AG made progress winning back clients who fled over capital concerns as it recovered from a turbulent 2016, but first-quarter profit was muted by debt-trading revenue that lagged behind peers.
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The German lender, fresh off an $8.5 billion capital increase, more than doubled its first-quarter net income from a year earlier, to EUR575 million ($627 million), it said Thursday. That was broadly in line with analyst expectations.
Deutsche Bank's big fixed-income trading business, a closely watched driver of profit, posted an 11% revenue increase from the same quarter last year. The lender said interest-rate and credit trading were especially strong. But its overall results from trading bonds and currencies lagged behind performances by big U.S. investment banks that benefited more from this year's fixed-income trading boost.
Deutsche Bank shares were down roughly 3% Thursday morning after results were announced. Shares in the lender are down about 2% this year, but have strongly rebounded from multiyear lows last fall.
Overall, Deutsche Bank showed it is stabilizing across its main businesses after a rocky 2016, when fears of big legal settlements and the lender's thin capital buffer spooked clients. The tumult last year also raised Deutsche Bank's costs to fund its trading and client-financing businesses, eating into profit. Those costs have since been coming down, according to executives.
The bank said that hedge-fund and corporate clients seeking deal advice and other customers are returning, after some pulled business late last year. Chief Executive John Cryan said in a statement Thursday that cost-cutting efforts -- which have included closing bank branches, firing employees and axing bonuses -- are paying off, and "asset flows are returning across the bank."
The bank's first-quarter revenue figure of EUR7.3 billion was roughly flat from a year earlier, excluding an accounting adjustment tied to the increased value of Deutsche Bank's own debt. On a reported basis including that accounting adjustment, revenue was down 9%.
In asset management, Deutsche Bank halted a yearlong sequence of quarterly losses of client balances, which has chiseled away at fees and other revenue in that business. Overall revenue in the retail-banking and wealth-management division increased 11% in the quarter.
Investment-banking revenue was mostly unchanged. The bank's ongoing process of cutting clients to cut risk and expenses continued to bring down revenue in some areas.
The first-quarter results are Deutsche Bank's first since it completed an $8.5 billion capital increase earlier this month in conjunction with strategic changes announced in March. The fundraising, Deutsche Bank's third sale of new shares since 2013, put to rest many investors' most severe concerns about the lender's capital buffers.
Deutsche Bank is also shuffling some senior executives, including Chief Financial Officer Marcus Schenck, who is moving to the investment bank, and is reuniting its corporate-finance and deal-advisory business with its trading unit. That restructuring of Deutsche Bank's biggest business is coming less than two years after it split the investment bank in half.
Citigroup banking analyst Andrew Coombs said in a note Thursday that he remains cautious about Deutsche Bank's ability to meet targets, including those measuring capital and leverage, or the reliance on borrowings to earn profit. The bank's hopes for "moderate growth" in revenue don't look certain, Mr. Coombs wrote. "This assumes a modest economic recovery and a pickup in client activity."
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(END) Dow Jones Newswires
April 28, 2017 02:47 ET (06:47 GMT)