"Challenging" revenue environment weighs on Deutsche Bank despite profit rise

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Deutsche Bank Announces 2012 Financial Results
Deutsche Bank revenues fell but profits rose (Source: Getty)

Deutsche Bank third-quarter profits more than doubled year-on-year but the lender warned of a "challenging" revenue environment following a global trend of weakness in investment bank trading revenues.

Shares in the Frankfurt-based lender fell by almost two per cent at the time of writing.

The figures

Net income rose to €649m (£578m), compared to €278m in the third quarter of 2016.

Revenues fell by 10 per cent year-on-year to €6.8bn because of "subdued" client activity compared to the post-Brexit vote and US election trading bonanzas in the second half of 2016.

The fall in revenues was entirely down to the large corporate and investment bank division, with a 23 per cent fall in in income. Bond and currency trading took a particularly big hit, down 36 per cent.

Costs fell by almost €900m year-on-year to €5.7bn, as restructuring and litigation charges fell.

Why it's interesting

In March Deutsche announced a plan to merge its Postbank consumer subsidiary, which it had previously sought to sell, as well as reintegrating the investment bank. John Cryan, Deutsche Bank chief executive, has faced significant pressure from investors to boost the bank's share price.

However, the investment bank, one of the global leaders before the financial crisis, has struggled when compared to international rivals, which have experienced less of a hit to trading revenues.

Deutsche has had more success with its private and commercial bank arm, which saw revenues rise by three per cent year-on-year. Today the bank also said it is on track to gain €900m in cost cutting from the Postbank merger, which is proceeding "on schedule".

The bank yesterday settled a US regulatory charge on manipulating the London Interbank Offered Rate (Libor), paying $220m after being accused of defrauding government bodies.

What Deutsche Bank said

Cryan said: “While the revenue environment remained challenging, we have made significant progress on our key initiatives such as the planned merger of Deutsche Bank and Postbank in Germany as well as the preparation for the IPO of our asset management business.

"We are convinced that the benefits of our efforts will step by step become more apparent in the coming quarters and years.”

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