Deutsche Bank cites progress on overhaul despite profit slide
By Tom Sims and Arno Schuetze FRANKFURT (Reuters) - Deutsche Bank's new boss hailed significant progress in his efforts to reshape the bank, having cut a quarter of the staff at its global equities business, as the lender posted a decline in quarterly profit. Chief Executive Officer Christian Sewing, who took the top job in April, had made the equities cull a pillar of his plan to restore profitability. It is part of a wider effort to cut more than 7,000 jobs by end of next year
By Tom Sims and Arno Schuetze
FRANKFURT (Reuters) - Deutsche Bank's new boss hailed significant progress in his efforts to reshape the bank, having cut a quarter of the staff at its global equities business, as the lender posted a decline in quarterly profit.
Chief Executive Officer Christian Sewing, who took the top job in April, had made the equities cull a pillar of his plan to restore profitability. It is part of a wider effort to cut more than 7,000 jobs by end of next year.
The details of restructuring progress at Germany's largest bank came on Wednesday as it announced a 14 percent drop in net profit in the second quarter from a year earlier. The quarter was marked by weakness in its key trading business.
"The last three months have given me confidence," Sewing wrote in a memo to employees. "We've made a start and we're already seeing the first signs of change in our results."
The company had more than 95,000 staff at the end of the second quarter.
Deutsche Bank is trying to bounce back from three consecutive years of losses and has had a run of negative headlines, including an abrupt management reshuffle, a downgrade by Standard & Poor's and failing the U.S. Federal Reserve's stress test.
The bank's shares closed down 1.4 percent at 10.31 euros and are down 35 percent so far this year.
Shortly after becoming chief executive officer, Sewing announced plans to cut its global equities business, as well as U.S. bond trading and its business that serves hedge funds. He said the moves would be swift.
Analysts at JPMorgan in a note to investors praised Deutsche's efforts under Sewing to cut costs but said the bank "needs to deliver" on material restructuring given a "limited track record of delivery in the past".
The ratings agency Fitch, which in June downgraded Deutsche's outlook to negative, said it saw challenges ahead.
"The bank will also have to prove its ability to compete with peers, most of which have fewer constraints as they have completed their own restructuring projects," Fitch wrote.
Deutsche had last week flagged that the quarter's net profit would be more than double analysts' forecasts in a rare piece of good news for the bank.
Net profit in the second quarter was 401 million euros ($468 million), down from 466 million euros last year. Revenues were flat at 6.6 billion euros, halting a steep decline from previous years.
"We're making important changes to our core businesses as promised, we're headed in the right direction on costs, and our balance sheet quality is strong," Sewing said on Wednesday.
Deutsche Bank is still struggling to repair its reputation.
Its DWS asset management unit saw clients pull 4.9 billion euros in assets in the second quarter. "The noise around the bank" had "some impact there", said Nicolas Moreau, CEO of the unit.
At the investment bank, revenue was partly helped by a one-time gain of 57 million euros from a disposal in the quarter.
Revenue at its cash-cow bond-trading division dropped by 17 percent despite more volatile markets, though the bank said it plans to funnel more money into the division.
By contrast, some big U.S. banks posted sharp increases in profit as volatility caused by escalating trade tensions and central bank policy changes stirred a rise in trading volumes across Wall Street.
Goldman Sachs Group Inc reported a 44 percent rise in second-quarter profit on Tuesday, driven by strength in its investment banking and fixed income trading businesses.
"Our hope is that over time we will begin to perform and close the gap against the peers," said finance chief James von Moltke on a conference call. "But we are focused on running our own race." ($1 = 0.8562 euros)
(Editing by Sunil Nair, Keith Weir and Alexandra Hudson)
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