Deutsche Bank Wins Back Some Customers -- WSJ
April 28 2017 - 3:02AM
Dow Jones News
German lender more than doubles quarterly net income after a
difficult 2016
By Jenny Strasburg
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.
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."
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
April 28, 2017 02:47 ET (06:47 GMT)
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