Deutsche Bank threatens deeper cost cuts as profits dive

Spain's Santander SAN.MC on Wednesday reported a 50 percent drop in quarterly net profit, hit by one-off charges.

Deutsche Bank DBKGn.DE warned that deeper cuts may be needed to turn around the lender after revenues fell sharply in the second quarter as the low interest rate environment and volatile markets weighed on the business.

Restructuring and redundancy costs jumped to €207 million and there was a €285 million writedown on goodwill from businesses it has got rid of.

Cryan said in a statement: "While our results show that we are undergoing a sustained restructuring, we are satisfied with the progress we are making".

The Frankfurt-based bank has been hit harder than most.

Deutsche's performance fell well short of the average of €188 million expected by analysts surveyed by Factset.

Deutsche Bank's shares have dropped 45% this year, compared with a 27% decline on the Stoxx Europe 600 banks index.

Deutsche also said it is talking to the U.S. Department of Justice in a bid to settle an investigation into the bank's mortgage-backed securities business.

While its revenues in transaction banking remained stable in the quarter, earnings from private, wealth & commercial clients witnessed a decline of 11%. The pretax loss at Deutsche Bank's unit for winding down unwanted assets narrowed to 632 million euros from 870 million euros a year earlier, according to the company.

Sure, Cryan's cost-cutting is having some positive impact too - expenses fell 5 percent from the year-earlier period - but with revenue shrinking, the cost-income ratio remains stubbornly high at 91 percent.

The figures are published ahead of the publication of the latest round of stress tests on European Union banks - the outcome of which will be known at 9pm London time on Friday - with much of the focus on Italy, particularly Monte dei Paschi di Siena (MPS), the world's oldest bank. Banks will likely increase fees and take other measures to pass on the pain, he said.

  • Aubrey Nash