Morningstar | Deutsche Bank Reports 2Q Loss Driven by Restructuring Charges; FVE Maintained
Deutsche Bank reported second-quarter 2019 losses of EUR 3.1 billion, in line with expectations after it announced its restructuring plans earlier this month. The bank already booked EUR 3.4 billion of the total anticipated EUR 7.4 billion in restructuring charges during the second quarter. For the remainder of the year, another EUR 1.7 billion in charges are expected. Excluding the charges in the second quarter, net income was EUR 231 million versus EUR 401 million in the same period last year. We maintain our fair value estimate of EUR 9 per share and no-moat rating.Revenues, down 6% versus the second quarter a year ago, remained under pressure from the corporate and investment bank. The segment experienced revenues decline 18% year on year because performance was lacking, particularly in sales and trading of fixed income and equities, segments which Deutsche is in the process of scaling down or exiting altogether. Weak origination and advisory revenues, which declined 30% in 2018, are more worrisome in our view however, because it will remain core to Deutsche’s remaining investment banking offering. Asset management on the other hand performed well with revenues up 6%, carried by net asset inflows of EUR 15 billion in the quarter. The private and commercial business had a mixed performance. Deutsche’s German operation benefited from volume growth offsetting continued deposit margin pressure, while the international business was affected by a treatment change of loan fees in Italy.
Progress on restructuring has been made already. Deutsche’s restructuring unit at the end of the quarter carried EUR 65 billion in risk-weighted assets and EUR 250 billion in leverage exposure. This translates into EUR 9 billion of risk-weighted assets that were disposed of. The bank has exited its cash equities positions, is in the process of disposing of its prime finance and electronic equities platform, and over 900 employees have been let go or given notice.
Deutsche Bank is a holding company acting as an international financial service provider. Co. offers a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world. Co. has operations or dealings with existing or potential customers in most countries in the world. Co. is organized into the following six corporate divisions: Global Markets (GM); Corporate & Investment Banking (CIB); Private, Wealth & Commercial Clients (PW&CC); Deutsche Asset Management (Deutsche AM); Postbank (PB); and Non-core Operations Unit (NCOU).
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