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Deutsche Bank expects to be profitable in 2018



Deutsche Bank
AG


DB -0.19%

announced a profit decline of 65% to 229 million euros ($ 263 million) in the third quarter, as a slump in trading volumes under German lenders threatened to cut costs and stabilize earnings

According to analysts, European banks are likely to lag behind their US counterparts. Expectations for Deutsche Bank are among the lowest as continental European banks started the winning season on Wednesday.

Germany's largest lender said net sales dropped 9% to 6.2 billion euros in the third quarter. [1

9659004] Analysts have expected that Deutsche Bank's corporate earnings will fall, while costs will decline after further revision.

A persistent concern of investors and analysts is that the Bank's intended steps lead to an uncontrolled decline in sales. Wednesday's results are unlikely to counter these concerns.

Income from investment banking fell 13% year-on-year to € 3 billion. The lender suffered a 15% decline in both fixed income and last year's shares.

The other two main businesses, Commercial Banking, Retail Banking and Asset Management, also suffered quarterly losses of 3% and 10%%, respectively,

Citigroup
Inc.

Analysts cited the "weak profitability of the core division" in Deutsche Bank's results on Wednesday, pointing out that the investment bank "is still losing market share (which we fear)." The lenders' profits were disappointing and were hurt by higher capital expenditures in the business, analysts said

Deutsche Bank also seeks to repair outdated technology and thorny relationships with regulators who have repeatedly criticized their compliance and system controls. However, the long struggle for money leaves Deutsche Bank with less money to make the crucial corrections than most of its competitors, especially US banks, have strangled the dealings of European banks at home and abroad.

In April, Deutsche Bank dismissed its CEO and replaced it with long-time Managing Director Christian Sewing after three years of losses and a number of restructuring measures that did not lead to cost-cutting commitments.

Sewing said Wednesday that the bank's pre-tax profit for the quarter – along with the reduction in employee numbers and capital improvements – marks "another milestone" toward the company's sustainable profitability goals. "We are well on our way to becoming profitable in 2018 for the first time since 2014," he said in a statement.

Broad support for Mr. Sewing's early initiatives, including steep downsizing and a back-to-root bias towards European customers, has not helped Deutsche Bank's stock. They have fallen more than 40% this year and are trading at multi-year lows near € 9.30

. Sewing told analysts on Wednesday morning that Deutsche Bank has maintained its global profile in important areas, such as senior positions in public equity offerings. He said that strategic decisions made earlier this year will weigh on short-term results, but will pay off in the long run, and said the bank proved its discipline in raising capital and controlling risks.

Write to Jenny Strasburg at jenny.strasburg@wsj.com


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