Deutsche Bank’s profits surge, but the bank’s bread-and-butter lending business and cost-cutting efforts face headwinds
Deutsche Bank AG’s results signaled that the bumper profits accruing to its investment bank may have peaked, exposing the deeper challenges the lender facesThe Frankfurt-based bank reported a drop in investment-banking revenue in the second quarter as booming client activity during the pandemic slowed down. Still, net profit surged compared with last year as the economic rebound in Germany put a lid on souring loans.
With the investment-banking business normalizing as the pandemic effects subside, focus will increasingly fall on the performance in its. Also important to investors: progress on its effort to cut costs and refocus the bank on core areas. Both are facing headwinds. Deutsche Bank continued to cut costs in the second quarter, but unexpected regulatory levies have thrown off expense-cutting targets for this year. Its retail business, meanwhile, has taken a hit from a court ruling related to customer-account fees.
Still, Deutsche Bank said it continues to expect group revenue to be flat this year following an exceptional 2020. Under an overhaul plan that began in 2019, the bank has set ambitious targets for 2022, including an 8% return on tangible equity—a key metric for profitability. The figure stood at 5.5% in the second quarter.
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