Deutsche Bank warned it may need deeper cost cuts to turn itself around, after revenue fell sharply in the second quarter of 2016 due to challenging markets and low interest rates.
“If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring,” chief executive John Cryan said on Wednesday. “We will not deviate from tough decisions just to flatter earnings in the short term.”
Cryan, who took the helm a year ago, has launched a deep overhaul of the bank, slashing jobs, revamping information technology and shrinking non-core assets.
But in contrast to some European peers, Deutsche is sticking with its strategic focus on investment banking, where its global reach has earned it the International Monetary Fund’s label of being the riskiest of all banks.
Deutsche’s cash-cow bond trading business slid by a fifth in the second quarter, contrasting with the performance of some US heavyweights who benefited from a more robust home market. Deutsche said it expected revenue to pick up in the second half.
Shares in Germany’s largest lender fell 4.5 per cent by 1050 GMT, making them the biggest decliner in Germany’s DAX index .GDAXI of blue chip companies.
Cryan said Deutsche was making progress on restructuring but investors and analysts said they had expected greater focus on cost cutting given falling revenue in several business areas.
“On cost cuts, Cryan only paid lip service today; he made no concrete announcements,” a top-ten investor said.
JP Morgan analysts wrote in a note: “We are disappointed that Deutsche Bank is not adjusting its cost target … considering the lower revenue environment.”
Quarterly net profit dropped to €20 million ($22 million) from 798 million a year earlier, but was ahead of forecasts for a 105 million loss, while group revenue slid 20 per cent.
Deutsche’s efforts to restructure and boost profit have been dogged by billions of euros in costs for litigation, settlements and fines for problems dating to before the financial crisis.
