Deutsche Bank says 2Q earnings report will top estimates ‘considerably’

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Deutsche Bank said Monday that its second-quarter earnings report would be stronger than analysts had expected, driving one of Europe’s worst-performing bank stocks up the most in more than a year.

The Frankfurt-based bank said that it expects to report net income of about 400 million euros ($468 million) and income before income taxes of about 700 million euros, “considerably” above estimates. The preliminary results — nine days before its official earnings date — were published according to regulatory guidelines.

The profit surprise is a rare piece of good news for Deutsche Bank investors that have seen the shares trading at a record low, a tumultuous management reshuffle and plan to reduce its global presence in its fourth major strategic overhaul in three years. New Chief Executive Officer Christian Sewing is cutting thousands of jobs and paring back businesses in the U.S. and Asia after recent attempts to restore profitability ended up eroding revenue.

Deutsche Bank shares rose as much as 9.1% on the news — the most since April 2017 — and were trading 7.3% higher at 10.31 euros as of 11:22 a.m. in Frankfurt. The bank had been the worst-performing banking stock in Europe this year amid the tumult, down about 36%.

The lender said group revenue will be about 6.6 billion euros, with the corporate and investment bank accounting for about 3.5 billion euros of that figure. Those earnings include a gain of 100 million euros on an asset sale and debt valuation adjustments reflecting a widening of Deutsche Bank’s credit spreads during the quarter.

“It’s not entirely clear where the beat is coming from, but if it’s mostly from widening credit spreads, then it’s probably not sustainable,” said Markus Riesselmann, an analyst with Independent Research who has a sell recommendation on the bank’s stock. “In fact, trading revenue seems to have decreased more than forecast, indicating that the bank still has a long way to go.”

Sewing, who took over in April, is accelerating cost cuts and a pullback from various investment banking activities around the globe. He’s committed to cutting almost 10% of jobs, retrenching in costly trading businesses and effectively giving up on competing head to head with Wall Street firms.

“Management believes that these results demonstrate the resilience of the franchise,” Deutsche Bank said in the filing.

Bloomberg News