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Deutsche Bank reports surprise surge in profits for second quarter, but revenues fall short

  • Chief Executive John Cryan said that the results were an improvement on last year but not good enough.
  • The bank has been hit with weaker earnings and legal troubles in recent years.
  • Shares of Deutsche Bank trade lower.
Shareholders of Deutsche Bank arrive for the bank's annual general meeting in Frankfurt, Germany, May 19, 2016.
Kai Pfaffenbach | Reuters
Shareholders of Deutsche Bank arrive for the bank's annual general meeting in Frankfurt, Germany, May 19, 2016.

German lender Deutsche Bank reported a surprise surge in profits for the second quarter of 2017, beating market estimates and doubling its pre-tax profit figure from last year.

Here are the key second-quarter metrics:

  • Revenue: 6.6 billion euros vs. 7.21 billion euros billion expected, according to Thomson Reuters
  • Net income of 466 million euros vs. 273 million euros expected, according to Thomson Reuters
  • Pre-tax profit of 822 million euros vs. 547 million euros expected, according to Thomson Reuters.

Chief Executive John Cryan said that the results were an improvement on last year but not good enough.

"(The results) give a good summary of where we stand today. Profitability is significantly better than a year ago. We made good progress in bringing costs down and continued to attract net money inflows from clients," he said in a statement Thursday.

"Despite the significant improvement, this level of profitability falls short of our longer term aspirations."

The bank highlighted lower restructuring and litigation charges that helped to bring down its expenses and boost profits. But the bank said that revenues had fallen 10 percent year-on-year due to a negative impact from the tightening of spreads on its own debt - or how much it pays to borrow money - and losses on the sales of certain businesses. Its sales and trading operations for fixed income and currencies posted a revenue decline of 12 percent compared to last year.

Shares of Deutsche Bank were trading 3 percent lower Thursday morning.

"Revenues were not as universally strong as we would have liked, in large measure because of muted client activity in many of the capital markets," Cryan noted. "As we modernize our bank we are turning our focus onto building profitable growth."

Regarding the wider economic outlook for the rest of 2017, the bank remained positive and there was an improving economic outlook in Europe. It added that it was continuing to manage its adjusted costs towards a 22 billion euro ($25.8 billion) target in 2018.

But it warned that the revenue environment was more challenging, impacted by muted client activity, low volatility and persistently low euro zone interest rates.

The bank has been hit with weaker earnings and legal troubles in recent years. In January, the bank agreed to pay a $7.2 billion settlement after the U.S. Justice Department found it had misled investors in its sale of residential mortgage-backed securities.

The bank said on Wednesday that "meaningful headway" had been made to resolve regulatory enforcement actions and litigation items and that its aim now was to continue to focus on technology investments and process improvement to drive efficiency gains, growth and higher returns."