Deutsche Bank reports highest second-quarter profit since 2011

Deutsche Bank today announced its highest second-quarter and half-year post-tax profits since 2011,Profit before tax was € 1.5 billion for the second quarter of 2022, up 33% year on year, while post-tax profit was up 46% to € 1.2 billion.

Post-tax return on average tangible shareholders’ equity (RoTE)1 was 7.9%, up from 5.5% in the prior year quarter.

Post-tax return on average shareholders’ equity (RoE) was 7.1% in the quarter, up from 4.9% in the prior year quarter, The cost/income ratio improved to 73%, from 80% in the second quarter of 2021, The effective tax rate of 22% for the quarter benefited from a change in the geographical mix of income.

For the first six months, profit before tax was € 3.2 billion, up 16%, and post-tax profit was up 31% to € 2.4 billion, Profit attributable to Deutsche Bank shareholders was up 32% to € 2.1 billion. Post-tax RoTE1 was 8.0%, up from 6.5% in the first six months of 2021, and post-tax RoE was 7.2%, up from 5.8%. The cost/income ratio improved to 73%, from 78% in the prior year period, Results for the first six months of 2022 included bank levies of € 736 million, up € 189 million, or 34%, over the prior year period. The effective tax rate for the first six months was 24%.

Deutsche Bank reaffirms 2022 revenue guidance of € 26-27 billion despite the deterioration in the macro-economic environment seen in the second quarter and expectations for a more challenging second half of the year.

The bank remains committed to continuing its cost reduction efforts and will continue to execute on its 2022 plan. However, the bank also recognises increasing cost pressures from factors outside its control including higher-than-expected bank levies, inflation, unforeseen costs related to the war in Ukraine, and litigation matters.

the bank also made the decision not to cap strategic investments in its control environment, staff, and technology to drive growth and efficiency, which are important for its long-term strategic direction as outlined in the Investor Deep Dive of March 10, 2022.

In the light of both revenue and cost developments, Deutsche Bank has updated its 2022 targets as follows:

The bank continues to target a post-tax RoTE1 of 8% (Group) and above 9% (Core Bank) for the year 2022, while recognising that the current operating environment makes delivery on these targets more challenging

Deutsche Bank confirms all other 2022 financial targets including a CET1 capital ratio of above 12.5% and a leverage ratio of around 4.5%.

The bank reaffirms the goals of its strategy of sustainable growth through 2025. For 2025, the bank targets compound annual revenue growth of 3.5-4.5%; post-tax RoTE¹ of greater than 10%, and a cost/income ratio of below 62.5%. The bank also reaffirms its aim for cumulative capital distributions of around € 8 billion in respect of the years 2021-2025.

Based on the resilience we have demonstrated in the first half, we reaffirm our 2022 revenue guidance, which we raised earlier this year. We continue to work towards our eight percent return on tangible equity target. At the same time, we face cost pressures in a more difficult environment than expected and continue to invest in the long-term strength of our platform. We remain fully committed to our sustainable growth strategy and to all our financial targets for 2025.

Investment Bank net revenues were € 2.6 billion, up 11% year on year. Fixed Income & Currencies (FIC) revenues grew 32% to € 2.4 billion, the highest second-quarter FIC revenues for ten years.

Net revenues in Rates, Foreign Exchange and Emerging Markets all more than doubled year on year, which more than offset a decline in Credit Trading compared with a strong prior year quarter.

Origination & Advisory revenues declined by 63% year on year, reflecting markdowns on Leveraged Finance commitments which impacted debt origination revenues. Adjusted for these, Origination & Advisory revenues were down 38% year on year, against the backdrop of a 45% year-on-year decline in the industry fee pool (source: Dealogic). Advisory revenues were up 50%, reflecting market share gains. For the first six months, net revenues were up 9% to € 6.0 billion.

Private Bank net revenues were € 2.2 billion, up 7% year on year, or 4% if adjusted for two effects: a significant reduction in forgone revenues from the ruling by the German Federal Court of Justice (BGH) in April 2021 regarding pricing changes on current accounts, partly offset by lower revenues from Sal. Oppenheim workout activities. Revenues in the Private Bank Germany were up 11%, or 3% if adjusted for the reduced impact of the BGH ruling, while the International Private Bank grew revenues by 2%, or 6% if adjusted for the effect on revenues of Sal. Oppenheim workout activities. Net new business volumes were € 11 billion in the quarter. This included net inflows of € 7 billion, including inflows into investment products of € 5 billion and new deposits of € 2 billion, and net new client loans of € 4 billion. For the first six months, net revenues were up 4% to € 4.4 billion and net new business volumes were € 24 billion.

Asset Management net revenues rose 5% year on year to € 656 million. This development was predominantly driven by a 6% rise in management fees to € 619 million, partly reflecting inflows in previous quarters, while performance and transaction fees were up 69% to € 31 million. Net outflows were € 25 billion, driven almost entirely by outflows of low-margin cash products in a challenging macro-economic environment, of which the majority returned during July. Net outflows excluding cash products were essentially zero, as net inflows from active Equity, Multi-Asset and Alternatives offset outflows in Passive products. Assets under management were € 833 billion at quarter-end, down 3% versus the prior year quarter, reflecting the aforementioned net outflows together with market conditions, partly offset by FX movements. For the first six months, net revenues were up 6% to € 1.3 billion.