Frankfurt (Reuters) -Deutsche Bank’s profit for the second quarter rose by 51 percent, which was better than expected. However, the bank was less optimistic about the division’s prospects for the whole year and warned about the economy’s future.
The results come during a week when major European banks are reporting their earnings. Investors are looking for signs that a weaker economy, higher interest rates, and the war in Ukraine are hurting their business and future plans.
Germany’s banks are at the centre of a geopolitical storm because the country depends so much on Russian energy, and if there are any supply problems, Germany’s economy will suffer a lot.
The shareholders’ share of the net profit was 1.04 billion euros ($1.06 billion). This is better than what analysts expected, which was a profit of about 788 million euros. Last year, the company made 692 million euros in profit.
It was the eighth quarter in a row that the company made money, which was a big deal after years of losing money.
This year is important for Germany’s biggest bank and its CEO, Christian Sewing. He needs to meet the goals he set when he started a costly overhaul of the bank in 2019.
Sewing told staff in a memo that they should be proud of their work, but the memo made the near-term economic outlook sound bad.
“The next few months will continue to be hard. “There are reasons to think that things will get worse in the economy,” he put words on paper.
Due to inflation, bank levies, and other costs related to the war in Ukraine, the bank changed its cost goal. It is no longer aiming for a cost-to-income ratio of 70% for this year. It is now thought that the ratio could reach the mid-70s.
The bank didn’t change its overall revenue forecast, but it did change its outlook for the investment bank. Now, it expects revenue from the investment bank to be “essentially flat” this year, instead of “slightly higher” as it had said before.
Deutsche, like its U.S. competitors, was hurt by a drop in deals because of the war’s uncertainty, but trading kept going because the markets were so volatile.
Overall, revenue from investment banking went up by 11% in the quarter, but revenue from the bank’s origination and advisory businesses went down by 63%.
One of the biggest parts of the bank, fixed-income and currency trading, made 32% more money.
The rise in interest rates helped the corporate bank make 26% more money.
($1 = 0.9854 euros)
