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Deutsche Bank (DB) Q2 Earnings Rise Y/Y on Higher Revenues

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Deutsche Bank (DB - Free Report) reported second-quarter 2020 net income of €61 million ($67.1 million) as against the year-ago quarter’s net loss of €3.1 billion. Also, the German lender reported adjusted profit before taxes of €935 million ($1 billion), up 44.7% year over year.

Second-quarter results benefitted from higher net revenues and a decline in expenses. Also, strong capital position was a tailwind. However, a drastic increase in provision for credit losses due to the impacts of the coronavirus outbreak was a major offsetting factor.

Revenues Rise Slightly, Provisions Flare Up

The bank generated net revenues of €6.29 billion ($6.9 billion), up 1% year over year. The upside was primarily due to higher revenues from investment bank.

Provision for credit losses rose substantially to €761 million ($837.1 million) from $161 million in the year-ago quarter.

Non-interest expenses of €5.37 billion ($5.9 billion) were down 23% from the prior-year quarter. Excluding restructuring-related charges, the bank reported adjusted costs of €4.9 billion ($5.4 billion), down 8% year over year.

Segmental Performance

Net revenues at the Corporate Bank division of €1.33 billion ($1.5 billion) rose 3% from the year-ago quarter. Higher revenues in global transaction banking led to the rise.

Investment Bank segment’s net revenues totaled €2.7 billion ($3 billion), up 46% year over year. Higher revenues from fixed income, particularly debt origination business, along with rise in origination and advisory resulted in the rise.

Private Bank reported net revenues of €2.16 billion ($2.4 billion), down 5% year over year. The fall primarily stemmed from the impact of COVID-19 and ongoing deposit margin compression, which offset the positive impact of continued growth in volumes.

Asset Management segment generated net revenues of €549 million ($603.9 million), down 8% year over year mainly due to the non-recurrence of periodic performance fees relating to an infrastructure fund in the prior-year quarter.

Corporate & Other unit reported negative net revenues of €154 million ($169.4 million) against net revenues of €184 million a year ago.

Capital Release unit reported negative net revenues of €70 million ($77 million) against net revenues of €221 million, reflecting businesses exited or discontinued and the impact of de-risking costs.

Capital Position

Deutsche Bank’s Common Equity Tier 1 capital ratio (fully loaded) came in at 13.3% as of Jun 30, 2020, compared with 13.4% in the year-ago quarter. Leverage ratio, on an adjusted fully-loaded basis, was 4.2%, up year over year from 3.9%.

Risk-weighted assets decreased €10 billion in the June-end quarter to €331 billion ($371.6 billion) sequentially.

Our Viewpoint

Deutsche Bank delivered decent second-quarter results. The company was successful in trimming costs and increased revenues with its initiatives. Also, capital position remained decent. The German lender’s restructuring efforts, aimed to boost revenues and drive improvement across all the business segments, look encouraging.

Deutsche Bank currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

ICICI Bank’s (IBN - Free Report) first-quarter fiscal 2021 (ended Jun 30) net income was INR25.99 billion ($344 million), up 36% from INR19.08 billion ($253 million) in the prior-year period. The net income included the coronavirus outbreak-related provisions of INR55.50 billion ($735 million).

Bank of Hawaii Corporation (BOH - Free Report) delivered an earnings surprise of 3.2% in second-quarter 2020. Earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 95 cents. However, the bottom line compares unfavorably with the $1.40 reported in the prior-year quarter.

TCF Financial Corporation reported second-quarter 2020 adjusted earnings per share of 54 cents, beating the Zacks Consensus Estimate of 47 cents. However, the figure plunged 5.3% from the prior quarter.

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