Deutsche Bank Posts Surprisingly Strong Q2 Preliminary Results for 2018

Deutsche Bank AG has unexpectedly released its preliminary second quarter 2018 results on Monday. Not only was the release unexpected, but the results themselves also surprised investors, with Q2 earnings forecast to be higher than market expectations.

The Frankfurt-based bank expects a net income of around €400 million. Before income taxes, the bank foresees an income of €700 million. This is much higher than analysts consensus.

In response to the higher than expected results, shares rose as much as 9.3 percent. This was the highest increase since April 2016. Around midday in Frankfurt shares were trading at 7.2 percent higher.

Before today, Deutsche Bank’s stock was down almost 40 percent this year, making it the worst-performing bank stock in Europe. However, according to the statement: “Management believes that these results demonstrate the resilience of the franchise,” and added the restructuring has “progressed rapidly.”

Group revenue is also expected to be above expectations at €6.6 billion. This is compared to the market's expectation of €6.4 billion.

The growth seems to be largely due to the corporate and investment bank. However, trading revenue is expected to drop by 15 percent - this is worse than the expected 10 percent drop from analysts.

A rare piece of good news

The preliminary results are a rare piece of good news for the bank, which has seen its shares trading at record lows, management issues, and disappointing financial losses. As a result, the bank plans to drastically scale back its global presence. In essence, this means the bank has given up hopes to compete with Wall Street firms.

As part of the descaling, the new CEO of Deutsche bank Christian Sewing, who was appointed in April, has said he is committed to cutting thousands of jobs. In fact, he has committed to cutting over 7,000 jobs by the end of 2019.

However, the filing on Monday showed that the bank lost only 1,700 jobs in the second quarter. This is a decrease of 40 jobs each working day. Whilst that might seem like a decent figure, the German bank was expected to lay off 70 jobs per day during May and June.

The Frankfurt-based bank expects a net income of around €400 million. Before income taxes, the bank foresees an income of €700 million. This is much higher than analysts consensus.

Group revenue is also expected to be above expectations at €6.6 billion. This is compared to the market's expectation of €6.4 billion.

The growth seems to be largely due to the corporate and investment bank. However, trading revenue is expected to drop by 15 percent - this is worse than the expected 10 percent drop from analysts.