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Home / Business / German bank sinks to painful loss as overhaul costs bite

German bank sinks to painful loss as overhaul costs bite



Deutsche Bank ( DB ) said that it took a charge of € 3.4 billion ($ 3.8 billion) for the three months ending in June, leading to a net loss of € 3.1 billion ($ 3.46 billion).
The performance had even worse than the bank had telegraphed. It said on July 7 that it would cost more than $ 2.8 trillion ($ 3.1 billion) for the second quarter.

Shares dropped more than 5% in Frankfurt before recovering some of the loss.

It would cost $ 231 million ($ 257.4 million), down 42% on the same period last year.

"Excluding transformation charges the bank would be profitable and in

Turnaround skepticism

Deutsche Bank has for years struggled to produce consistent profits despite a series of overhauls.

The lender is cutting 1
8,000 jobs while dramatically shrinking his investment banking business, shuttering his equities sales and trading unit while cutting back its rates division.
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It's so creating a " bad bank "for $ 74 billion ($ 83 billion) in assets that eat up too much capital.

Sewing has described the plans as "nothing short of reinventing" the 149-year-old bank. After two decades of trying to compete with [19459002 and Morgan Stanley [ MS ) Deutsche Bank wants to shift its focus to more reliable sources of revenue, such as corporate money management.

The amount of money spent on a transaction is high.

The transition is about $ 7.4 billion ($ 8.3 billion) by 2022. Analysts

JPMorgan Chase analysts Kian Abouhossein and Amit Ranjan said in a note Wednesday

Deutsche Bank needs to offload assets in the bad bank faster than planned.

The bank is taking heat from investors in the meantime.

Early results

Sewing told on Wednesday that

"We can say with confidence that we have passed through the first hurdle: by and large our strategy is no longer in question, either by our investors or by the

Much of the turnaround effort is already underway, he added.

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The company has already started winding down assets via the "bad bank," which is the capital release Unit.

"This is painful, but it is important for us to give it more than just to leave people in limbo," Sewing said. [19659005] Despite this, the results included some early warning signs.

Revenues in the transaction banking unit, central to Sewing's vision for a new Deutsche Bank, fell 6% compared to the same period last year.

And investment banking services the bank wants to hold onto, as its advisory business, shows signs of strain. Revenues from the advisory unit fell 30%, the bank said.

German bank therefore faces the prospect of even lower interest rates in the eurozone. Historically low rates for crimped lending profits, and analysts now expect the European Central Bank to push rates into negative territory as soon as September.


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