Deutsche Bank has abandoned its cost target for 2022 and therefore an important part of the company’s strategy. That said, CFO James von Moltke Wednesday in Frankfurt when the quarterly figures were announced. Instead of an absolute number, the focus will only be on the cost / income ratio, that is, the expense ratio. It is expected to drop from 80% currently to 70% by 2022. It was not until the end of 2020 that the bank tightened its cost target, even though the brand initially issued seemed ambitious.
The need to save at Germany’s largest financial institution is apparently no longer so urgent given the robust earnings. For the second quarter, the bank announced a net profit of 692 million euros, clearly exceeding analysts’ expectations. All four divisions developed as expected or even better, von Moltke said. This is the fourth consecutive quarterly profit and the best fourth quarter since 2015. The bank raised its profit target for the coming year. After an initial gain of up to 4.5%, Deutsche Bank shares were recently in the red by a good 1%.
In investment banking, which benefited from unusually high demand for capital market products in 2020, revenues fell eleven percent from April to June to € 2.4 billion. In its core business, bonds and currencies, Deutsche Bank was also better off than its Wall Street rivals with an eleven percent decline.
The group’s boss, Christian Sewing, has been trying to get the institute back on track for two years with a new strategy. Part of the plan, in addition to restructuring the company’s divisions, included massive savings and the elimination of 18,000 jobs. Profits at the merchant bank, which Sewing initially referred to as the heart of the new strategy, fell another eight percent in the second quarter. Overall, however, the bank sees itself on the right track. Restructuring efforts are “well advanced,” von Moltke said. He defended the decision not to state an absolute cost target in the future. It had been planned for a long time.
As profits have stabilized, the institute faces a growing number of litigation and regulatory issues: e.g. impending US Federal Reserve sanctions, allegations of erroneous sale of FX derivatives in Spain, expanded mandate Bafin’s money laundering official at the bank and a retrial in the United States alleging the bank was involved in a pyramid scheme. Of the latter, von Moltke said the allegations were considered unfounded.