OREANDA-NEWS. Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today reported second quarter results. Group net revenues rose 17% from the prior year, to EUR 9.2 billion with noninterest expenses 17% higher at EUR 7.8 billion. Income before income taxes was EUR 1.2 billion in 2Q2015, compared with EUR 917 million in 2Q2014.

“The second quarter highlights the strengths of and challenges facing Deutsche Bank,” said John Cryan, Co-Chief Executive Officer. “Solid revenue growth underscores the fundamental strengths of our businesses and the commitment of our people. However, our challenges are also evident in the unacceptably high level of our costs, our continuing burden of heavy litigation charges, a balance sheet that must be more efficient, and the poor overall returns to our shareholders.” 

He continued: “We must address these challenges. This is not a question of strategy; Strategy 2020 is built around the strengths of Deutsche Bank and we commit to it. But for our strategy to succeed, we must become more efficient. We must be disciplined in how, where and with whom we do business. We must critically review any countries, business lines, products, and relationships that are unattractive. We must shrink our balance sheet, focusing on our many low-return assets. We must reduce organizational complexity, which inhibits effective decision making, blurs accountability and embeds wasteful cost. Only by doing this can we produce the attractive returns our shareholders deserve.” 

He concluded: “Our financial performance does not reflect our tremendous potential. Deutsche Bank is a first rate institution built around long-standing and  deep client relationships, strong product lines, skilled and committed staff, an invaluable brand and an exceptional position in our home market. We are dedicated to ensuring that our financial performance reflects those inherent strengths.”

Group net revenues in 2Q2015 were EUR 9.2 billion, an increase of EUR 1.3 billion, or 17%. Approximately EUR 570 million of the revenue growth was attributable to favorable foreign exchange movements.

Business revenue growth compared to 2Q2014 was principally driven by the 23% (EUR 804 million) growth in CB&S and 25% (EUR 282 million) growth in Deutsche AWM.

In NCOU, revenues of EUR 201 million were EUR 253 million higher than 2Q2014 which included a loss from the restructuring of our holding of Maher Terminals debt.

Provision for credit losses was EUR 151 million in 2Q2015, a decrease of EUR 98 million, or 39%, compared with 2Q2014.

The credit environment remained benign with no significant single name credit provisions in the quarter, along with provision releases in part related to ongoing non-performing loan sales.

Noninterest expenses were EUR 7.8 billion in 2Q2015, up EUR 1.1 billion, or 17%, compared with 2Q2014. Foreign exchange movements accounted for approximately EUR 530 million of the quarterly increase.

Litigation-related costs were EUR 1.2 billion, an increase of EUR 757 million compared with 2Q2014.

Noninterest expenses were also affected by increased expenses for staff compensation and benefits, driven in part by hiring to improve regulatory compliance and for business growth, and market-driven compensation adjustments. These were partly offset by OpEx savings, the sale of The Cosmopolitan of Las Vegas in 2014, and lower cost-to-achieve expenditure.

Group income before income taxes was EUR 1.2 billion in 2Q2015 versus EUR 917 million in 2Q2014 reflecting revenue growth and lower provision for credit losses. This was partly offset by higher noninterest expenses.

Net income for 2Q2015 was EUR 818 million, compared with EUR 238 million in the prior year. Income tax expense in 2Q2015 was EUR 410 million versus EUR 679 million in 2Q2014. The effective tax rate in 2Q2015 was 33%.