Deutsche Bank, a German lender, announced a decline in second-quarter earnings due to increased costs and credit-loss provisions. Despite this, the bank revealed plans to resume buying back shares.
Financial Performance
The net profit attributable to shareholders in the quarter fell to 763 million euros ($843.5 million) from EUR1.05 billion in the prior year. However, total revenue experienced significant growth, reaching EUR7.41 billion, an increase of 11%.
Factors Impacting Earnings
Deutsche Bank’s second-quarter earnings were negatively affected by noninterest expenses totaling EUR5.6 billion, a 15% increase compared to the previous year. Out of this amount, EUR655 million consisted of nonoperating costs, which included litigation and restructuring expenses.
The bank faced EUR395 million in higher-than-expected litigation charges, along with EUR260 million in restructuring and severance expenses due to the optimization of its mortgage platform and reduction in nonclient-facing roles.
Additionally, the bank experienced an increase in credit loss provisions, reflecting the challenges posed by the current economic environment.
Industry Observations
In a statement, Chief Financial Officer James von Moltke mentioned that while they had not observed any persistent deterioration in the overall environment, they did note some softening in certain German midcap sectors, such as Automotive, as well as continued weakness in Commercial Real Estate.
Plans for Share Buybacks
Deutsche Bank separately announced that it intends to start share buybacks next month, continuing throughout the remainder of the year. The bank plans to allocate up to EUR450 million for this purpose, an amount roughly 50% higher than in 2022.
This decision aligns with the increase of its 2022 dividend to 30 European cents.
Capital Return to Shareholders
Deutsche Bank expects to return over EUR1 billion in capital to shareholders in the current year through dividends and share repurchases. This is a notable increase compared to approximately EUR700 million returned in 2022.
