The numbers: Strong. Net profit at the German banking giant more than tripled in the second quarter, versus the same period last year. After a period of volatility, the bank has strung together a series of steadily improving quarterly results for the first time in quite a while.
The takeaway: Despite the positive headline earnings, Deutsche Bank’s new boss, John Cryan, stated flatly that the result ”does not reflect our tremendous potential.” (Indeed, the latest earnings were flattered somewhat by temporary exchange-rate movements and tax quirks.)
Cryan, the former CFO of UBS, took over at the beginning of this month, charged with imposing greater discipline at a bank that has become known for over-promising and under-delivering. He certainly isn’t soft-pedalling the challenges that the bank still faces, which he described as ”the unacceptably high level of our costs, our continuing burden of heavy litigation charges, a balance sheet that must be more efficient, and the poor overall returns to our shareholders.” Is that all?
What’s interesting: Legal issues continue to haunt Deutsche Bank, with litigation charges more than doubling in its latest quarter. This stems mostly from a $2.5-billion fine in April by regulators in the US and UK for rigging interbank interest rates. And there’s more in store—the bank has set aside €3.8 billion ($4.2 billion) to cover the cost of future litigation—a drag on earnings that shows few signs of letting up.