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Deutsche Bank Posts Pre-tax Profit In Q2, Provision For Credit Losses Up; Stock Down

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Deutsche Bank AG (DB) reported Wednesday a pre-tax profit in its second quarter, compared to last year's loss, despite higher provision for credit losses. Net revenues edged up with good growth in Core Bank revenues, while asset management revenues were weak.

Looking ahead, the German banking major reaffirmed its guidance for full year 2020 provision for credit losses of between 35-45 basis points of loans. Deutsche Bank shares were losing around 3 percent in the trading in Germany.

Christian Sewing, Chief Executive Officer, said, "In a challenging environment we grew revenues and continued to reduce costs, and we're fully on track to meet all our targets. This enabled us to more than offset higher provision for credit losses and remain profitable while supporting clients through difficult conditions."

For the second quarter, pre-tax profit was 158 million euros, compared to a pre-tax loss of 946 million euros a year ago.

The company recorded a net loss attributable to shareholders of 77 million euros, significantly narrower than prior year's loss of 3.27 billion euros that included transformation-related effects of 3.4 billion euros.

In the quarter, Core Bank, which excludes the Capital Release Unit, recorded profit before tax of 753 million euros, compared to prior year's loss of 180 million euros in the prior year. This was driven by revenue growth of 6 percent and a 19 percent reduction in noninterest expenses.

The Capital Release Unit reported a loss before tax of 595 million euros, down by 22 percent from last year.

Provision for credit losses was 761 million euros, compared to last year's 161 million euros.

According to the company, Core Bank revenue growth, combined with continued progress on cost reduction, was sufficient to offset a rise in provision for credit losses, in line with management expectations and driven primarily by the impact of the COVID-19 pandemic.

Second-quarter Group net revenues were up 1 percent to 6.29 billion euros from 6.20 billion euros last year, despite exit of Equities. Core Bank net revenues rose 6 percent to 6.4 billion euros, or up 8 percent to 6.3 billion euros ex-specific items. Investment Bank net revenues went up 46 percent.

In the quarter, Asset Management net revenues were down 8 percent, primarily due to the non-recurrence of periodic performance fees relating to an infrastructure fund in the prior year quarter.

Assets under Management rose 3 percent to 745 billion euros in the quarter from 721 billion euros a year ago.

In Germany, Deutsche Bank shares were trading at 7.79 euros, down 2.59 percent.

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