Deutsche Bank Registers Surprise Profit for Third Quarter

On Thursday, after weeks of making negative headlines, Deutsche Bank was however able to broadcast an unexpected profit in the third quarter. After a record loss in the year-earlier period, this quarter was benefitted from a surge in bond trading that boosted all Wall Street banks’ earnings. The hike helped the bank’s shares to touch a more than one-month high.

The embattled bank, a significant part of the global financial system disclosed third-quarter net income of€278 million ($303.1 million), which can be compared favorably to a 6 billion euro loss for the same period a year ago. The numbers also beat market expectations, so did revenues which came in at € 7.49 billion ($8.17 billion).

John Cryan, Deutsche Bank CEO cited that they continued to make good progress on restructuring the bank. Nonetheless, in the past several weeks these positive developments failed to gain attention and their negotiations concerning the Residential Mortgage Backed Securities matter in the United States remained in the limelight.

Deutsche Bank hiked the amount of money it has set aside in order to cover the legal bill for its several missteps of the past. Litigation reserves increased to 5.9 billion from 5.5 billion euros at the end of June.

The bank’s restructuring and litigation costs for the third quarter were lower than analysts had anticipated. Revenue from trading, especially in credit, was stronger than a year ago, mainly driven by Deutsche’s trading activities. While business declined in all other operating businesses chiefly because of the effects of the low interest-rate environment.

Deutsche Bank is fighting a $14 billion demand from the US Department of Justice (DoJ) over the misselling of mortgage-backed securities in the run-up to the financial crisis. Discussions are in progress with the DOJ to fix its investigation of Deutsche Bank’s pre-financial crisis RMBS business. Though it gave no information on when it expects to settle the case.

Deutsche Bank’s cash cow bond trading division was up 14 per cent in the quarter, on the back of Britain’s surprise vote to leave the European Union and bouts of anxiety about monetary policy around the world. As compared to its peers, Deutsche Bank’s bond trading activities however highlighted a subdued rebound, in part related to its decision to trim the unit.

In equities trading, Deutsche Bank faced decline in revenues in the quarter since low stock markets volatility gave investors less reason to trade, whereas revenues from corporate and investment banking fell by 1 per cent on account of weaker M&A fees and capital markets activity.

Deutsche Bank’s Tier 1 capital ratio, a measure of financial strength, grew 11.1percent from 10.8 percent in the second quarter. The lender is working to boost that ratio to at least 12.5 percent by 2018.

Deutsche Bank’s shares have fallen 41 percent this year, more than twice the decline of the Stoxx Europe 600 Banks Index.

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