After the subprime crisis and the scandal of Libor (the interbank rate, a barometer of the markets, as traders have been manipulated), the Deutsche Bank is still not totally out of business. The recovery initiated by the director-general John Cryan, who is going through a refocusing on less risky activities (less markets, more financing of the economy and corporate customers), takes time. In the second quarter, the first German bank showing a fall of 10% in net banking income, at 6.6 billion euros, mainly due to the decline of the trading of the bond (-12%).
As a result, Deutsche Bank has revised downward its forecasts : it is now expecting a decline in revenues in compared to last year, and not stable, after a decline of 10% already in the previous year.
“Revenues have not been strong everywhere as we would have wished, in large part due to a reduced activity of the customer on the capital markets,” said John Cryan in the press release half-year results.
Reduction of costs and headcount
Net earnings for the quarter, to 466 million euros, is however higher than expectations, thanks to cost reductions.
“Despite a significant improvement, this level of profitability is below our aspirations for the long term”, said the director general.
All divisions recorded a decline in revenues, the bank’s investment (not only on the rates and currencies, but also equities) in the asset management business, which needs to be in the stock Exchange, through the bank’s private and commercial, which includes the retail activity of the postal bank German Postbank, which Deutsche Bank has finally abandoned the project assignment.
John is engaged in a plan for the drastic reduction of costs (goal of 3 billion euros less by 2021), via the elimination of 9,000 jobs, on workforce 96.652 at the end of June 2017, decrease by 1,500, despite the strengthening of the teams of compliance and anti-crime. It must prove to investors that it can carry out this adjustment without too much shrink the activity, and lose market share.
The action Deutsche Bank has accused the coup at the Frankfurt stock Exchange, yielding 6% by the end of the session. The title had rebounded 75% since its low point of September last, in the full stock market panic on substantive questions about the very survival of the bank. Since then, Deutsche Bank has achieved a capital increase of 8 billion euros, which has reassured investors.