Deutsche Bank Profit Plunges 98% And The Worst Is Yet To Come

Tyler Durden's picture

The latest confirmation that Germany's troubled banking giant Deutsche Bank is unable to navigate the troubled waters of NIRP came on Wednesday when the bank announced that its second-quarter net income fell 98% from a year earlier, hurt by weaker performances in trading, investment banking and other core areas. The lender said net income tumbled to €20 million ($22 million) from €818 million a year earlier, modestly better than the €22mm loss expected, while net revenue dropped 20% to €7.4 billion.

After rebounding modestly on the beat, the bank’s shares fell tumbled 5% on Wednesday morning, their lower level in 2 weeks; today's decline has dragged DB stock 45% lower in 2016, making it one of Europe's worst performers YTD (the Stoxx 600 is down 27% in 2016).

As the WSJ notes, the Frankfurt-based bank has been hit harder than most. It is cutting costs and clients and trying to satisfy new, more-stringent capital requirements over the next three years. Its turnaround strategy has eaten into trading and investment-banking revenue, and investors’ concerns about the adequacy of its capital cushion have persisted. The bank also has been trying to settle regulatory investigations expected to result in big fines, another uncertainty for investors.

Chief Executive John Cryan said in a statement that the bank is making progress in a multiyear turnaround, but warned that if weak market conditions persist, it “will need to be yet more ambitious in the timing and intensity of our restructuring.” 

Deutsche Bank CEO John Cryan

Investors were unimpressed, and the shares now trade for two thirds less than their tangible book value, a steeper discount than even during the depths of the financial crisis.

What is more troubling is that as Bloomberg adds, the worst is yet to come.

The second quarter gives little cause for celebration. In a quarter which saw revenue sink 12% and net income came in at almost zero,  even after litigation costs tumbled, the only division to increase revenues and profit was Postbank, the consumer unit, which Cryan hopes a "white knight" will take off his hands. And unlike rival Commerzbank, Deutsche Bank was able to boost its key capital ratio fractionally in the quarter.The focus on cutbacks meant that Deutsche Bank was unable to benefit from its strength in fixed-income trading in a quarter during which the U.K. vote to leave the European Union stoked market volatility.

While debt trading revenue climbed 22 percent at the top U.S. investment banks in the quarter, Deutsche Bank's fixed-income trading revenue fell 19 percent. In foreign exchange, performance was flat, a sign that restructuring is preventing the bank from getting the most out of the market action.

Low interest rates and economic uncertainty stemming from Brexit weighed on the lender’s biggest businesses last quarter. Revenue fell year-over-year in all four of Deutsche Bank’s business divisions, including asset management. The worst year-over-year revenue decline was in global markets, the bank’s securities-trading operation and its biggest unit by revenue. That division’s second-quarter revenue declined 28% from the year-earlier period. Within the business, overall sales and trading revenue fell 23% during the quarter from a year earlier. Debt trading tumbled 19%, a far cry from the 22% rebound among top US banks.

Another problem for the CEO is that the bank's cost-cutting effort is also lagging compared to US peers: while it is having some positive impact - expenses fell 5% from the year-earlier period - with revenue shrinking, the cost-income ratio remains stubbornly high at 91%.

Another problem: headcount. It stood at 101,307 at the end of June, down by 138 full-time equivalents from the end of March, but still up on the year-earlier period. None of this looks like peak pain.

As Bloomberg adds, Cryan's suggestions on Wednesday that he might have to be "yet more ambitious" in the timing and depth of the restructuring looks like a promise to bolt the stable door long after the horse has bolted. The weak economic environment is unlikely improve soon, especially in Europe, where lower-for-longer interest rates are crushing bank profits. Worse, Deutsche Bank is also seeing rising loan losses from the shipping and metals and mining industries.

None of this bodes well for the execution of Cryan's strategy, and adding to the pressure is that rival banks moving faster with their overhauls: Italy's UniCredit is considering a 5.5 billion-euro capital raising and asset sales.Cryan would be right to ask his predecessors why they didn't move sooner and cut deeper. As it is, he's been left with what he admits will be a "sustained restructuring." Translated, that means peak pain is yet to hit.

Finally, the biggest problem for DB remains its massive balance sheet. Morgan Stanley analysts calculated that Deutsche Bank has a €9 billion capital hole to fill by 2018, and that's not including damage caused by future litigation costs, which considering DB's record of pervasive capital rigging, are sure to rise.

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Bank_sters's picture

I'm sure they'll be just fine after the central banks paper it over.   


In other news, to hear bill clinton talk about his love for his lesbian wife and webb hubbell's daughter was touching.   I'm sure  glad they brought brian williams out of retirement for this one... 

Bill Clinton ditched Secret Service on multiple ‘Lolita Express’ flights
ChronixSnart's picture
ChronixSnart (not verified) Bank_sters Jul 27, 2016 6:54 AM

The jew run FED knows their joo world order jootopia will not succeed as long as there are any white countries left. which is why Germany is committing Suicide By Mudslime, and America is committing suicide by Whetbax.



Scoff all you like Goyim Sheeple!

VinceFostersGhost's picture
's 2% all good!

Never One Roach's picture

No worries, Mon. DB is covered by the Global Central Bankers "No Banker Left Behind Act."


Just enact negative rates for savers and let the "Loyal Customers" bail the bank out thru a "Bail-In."


The customers will be honored to fall on their swords for their bankers.

wildbad's picture

Backdoor BAILOUTS are already happening.


When ECB (Draghi) make funds available to these banks which use said fiat to buy back their own shares, and taxpayers are on the hook for that free money, how is that NOT a taxpayer bailout?

ParkAveFlasher's picture

Profits shmofits.  Free money, bitchez!

mtl4's picture

At least they made a quarter may not look as good.

TahoeBilly2012's picture

So who has audited US gold lately? Oh, I see. No one has. Well someone has, but probably in Jerusalem where it's being safely kept.

MalteseFalcon's picture

Brexit was well timed and I doubt it was a "people's movment".

Things that go bump's picture

I'm terribly worried. Is this going to affect those poor banker's bonuses?

cheka's picture

nooooo!   then the brain drain

eclectic syncretist's picture

The rotten floors on the houses of cards are getting weaker all the time.

philipat's picture

Hey Vince, keep an eye out up there for Seth Rich, a new arrival. Assuming he gets admitted. That "Clinton" section up there is getting pretty crowded?

valjoux7750's picture

Exactly, they made two percent. That twice what they pay my savings account!

Philthy_Stacker's picture

Hey Shart! Everything coming out of your mouth is hateful garbage, with no basis in fact.


'joo world order jootopia'





BigDawgz's picture

I'm sure they'll be just fine after the central banks steal the Average Joe's money to bail them out.

Fixed it for you.


bamawatson's picture

lesbian? skank is too hideous to be called lesbian;
full on butch bull dyke
appropriate mr don no bra zile is now the man

VinceFostersGhost's picture



Didn't understand a damn word you just said.....but I liked the way you said it.

Philthy_Stacker's picture

Bama. Can't you leave your personal LBGT hate at the door? Any kind of hate, really.
I see so many of you posters with good ideas about how we can fix things and then you go and ruin it by blaming Jews, Blacks, Gays, Zionists, Lizards, etc.

Acceptable objects of scorn:
Idiots or Ignorants (one of my personal favorites)
Specifically named - ie. Clinton, Trump, et. al.

I hope a butch bull dyke will one day encounter you in an alley and have her way with you live on YouTube.

Tall Tom's picture




Who made you the judge of "acceptable objects of scorn"?


I believe that arrogant assholes are worthy of scorn.


I suppose that you do not believe that Testicular Cancer survivors are worthy of scorn.


I personally do believe them to be worthy of scorn as THEY HAVE NO you.


Go back to your Testicular Cancer Survivor's Group.


(And if you somehow got here by accident...The entire theme of Fight Club was about the Main Character who did not have any balls and then grew a pair.)


And those LGBT freaks and demons can go straight to Hell and burn in Hellfire. Yes they are worthy not just of scorn but of eternal damnation.


Another fucking liberal.

peddling-fiction's picture

+1 TT

Philthy_Stacker: Hey, by the way take a look at this video. You might learn something about the Juice.

How to break the money ch@ngers power in 2016.

StagStopa's picture

Ave, Lillith...



bamawatson's picture

gay? i call em FAGGOTS
what is gay about sticking your dick up another man's filthy shithole
sounds QUEER to me

StagStopa's picture

Lol. You are "gay", faggot. You are gay for me, a goddess. I would force you to your knees, sissy.


divingengineer's picture

Dont attempt to inject reason into this conversation...we're trying to hyperventilate here. 

Kagemusho's picture

Bill Clinton ditched Secret Service on multiple ‘Lolita Express’ flights

And I can only imagine that they breathed a sigh of relief. Almost everyone that isn't of the Inner Circle who rides with Bill dies in actuarially improbable 'accidents'.

WillyGroper's picture


perhaps life insurance policies on their inner orbit?

POLI...peep owned life insurance.

DavidC's picture

Yes, that'll be why the Dax is UP over half a percent this morning. Makes complete sense...


Paul Kersey's picture

A 98% plunge in profits is about as low as they could go without calling it a loss. I'm guessing that if the bank's NPLs were marked to market, instead of marked to make believe, the plunge in profits would certainly have been booked as a serious loss.

philipat's picture

So everything is awesome. Come on Mr Yellen, make it 100bps rise. I dare you....

Crash Overide's picture

So is now a good time to buy the Deutsche dip?

bobbyjohnson's picture


nmewn's picture

Not to worry folks!

They've still got 98% to go  ;-)

truthalwayswinsout's picture

Watch this closely. With many overseas banks ready to fold in Spain, Italy and now Germany you will see a massive cascading default across the world because of derivatives.

The first real sign is what is happening now; they have to admit their losses. The second sign will be their going bankrupt or being rescued and watch the value of the dollar. Both treasuries and the dollar will rise in value as many overseas will start running from the coming tsunami. When you see the dollar rise, gold fall, and treasuries rise as well, go to your bank and remove as much cash as you can possibly stand. Hide it in a safe place because about 50% of the US banks will begin their dance with destiny by going out of business.

shantyman's picture

The dollar, gold, real estate and US Equity markets will ALL rise as money will be desperate for safety and tangibility... that is how u r going to see DOW 20k etc...

beijing expat's picture

Sure, but there will be huge liquidity issues. These assets may rise but will fall as deflation does its dance of death. Cash is King until further notice.

cheka's picture

deflation?  the deflationists got slaughtered in the last drama.  surprised to see it again so soon

frbny stands at the ready to do it again

the cash holders should have been RICHLY rewarded in 2008, as demand for cash was off the charts.  instead they got the shaft from the nyc duals.  disgusting


RawPawg's picture

i thought USA always wanted to be first

not last in a collapse..FML

lakecity55's picture

With everything else I have read, including Willie, DB could be the domino, and I'll bet it's going to be some small unit of DB that faults and starts the cascade. You guys are right, there is too much derivative exposure.

I was pleasantly surprised to see Trump insert Glass-Steagal back into the Platform. If he gets the WH, he'll have to use the bully pulpit to ram it through Congress.

I'm thinking he'll have to use the old EOB across the street; it may take some time to fumigate the White Mosk and dispose of all the hidden prayer rugs.

Philthy_Stacker's picture

DB is my pick to fail first since last July. I actually have a bet on with my buddy. He says Italy.

Panic Mode's picture

Yes. Europe will fall first. Then maybe Asia. The last man standing will be the US dollar which will be skyrocket as everyone tries to cling on it and then ka-boom.

When the government comes out and calms the public that the banks are fine - run. The bank holidays are for the privileges to get their cash out first, then leave for the public to panic when the bank opens the door again.


Panic Mode's picture

Don't worry. It's *cock solid*.

Cast Iron Skillet's picture

maybe they can still get Bill & Hillary to speak ... that'll fix it!

VinceFostersGhost's picture



get Bill & Hillary to speak


Spend a quarter of a million......make a trillion!

lakecity55's picture

DB CEO: "We're going under, men! Get BC to make a speech. Maybe we'll get some kind of bailout from the US!"
Minion: "Here are the contribution forms for the CGI."

overmedicatedundersexed's picture

we have had a recovery and all is well...why a mega bank is having trouble cannot be explained by normal economics, as , we have told you time and again all is well.

of course there are some naybobs on obscure internet sites that say our data is fake and false, but who you gonna believe??

is soros shorting DB? you bet.