The FINANCIAL — Results in 2Q2013 reflected solid revenues across the Core Bank and good progress in Deutsche Bank's Operational Excellence (OpEx) program, which influenced Bank's noninterest expenses, according to Deutsche Bank AG.
While Deutsche Bank reduced operating expenses, which reflected the ongoing implementation of OpEx, at the same time, related cost-to-achieve in comparison to previous quarters increased. In addition, Deutsche Bank results reflected litigation related charges.
Net revenues in 2Q2013 increased by 2% to EUR 8.2 billion, compared to EUR 8.0 billion in 2Q2012. In Corporate Banking & Securities (CB&S) revenues were EUR 3.7 billion, up EUR 313 million, or 9%, versus 2Q2012. This was mainly supported by improved market sentiment in Sales & Trading (equity) as well as strong issuance activity in Origination and Advisory. Reduced revenues in Sales & Trading (debt and other products) reflected a more challenging market environment compared to 2Q2012. Revenues in Global Transaction Banking (GTB) were up EUR 14 million to EUR 994 million, or 1%, from 2Q2012 despite an ongoing challenging market environment and continued pressure on margins. 2Q2013 included a gain from the sale of Deutsche Card Services. Deutsche Asset & Wealth Management (DeAWM) revenues increased by EUR 57 million, or 6%, to EUR 1.0 billion, versus 2Q2012 mainly reflecting a higher asset under management base and higher client activity levels. Private & Business Clients (PBC) revenues were EUR 2.4 billion in 2Q2013, up EUR 144 million, or 6%, compared to 2Q2012, benefiting from improved market conditions and positive one-off effects in other products category. Revenues in the NCOU decreased by 53% from EUR 414 million in 2Q2012 to EUR 193 million in the current quarter which mainly reflects the reduced asset base due to our de-risking activities. Consolidation & Adjustments (C&A) net revenues declined from negative EUR 55 million in 2Q2012 to negative EUR 167 million in 2Q2013, mainly due to the non-recurrence of positive effects from interest on taxes recorded in 2Q2012. Partly offsetting were effects from different accounting methods used for management reporting and IFRS, according to Deutsche Bank AG.
Provision for credit losses were EUR 473 million in 2Q2013, an increase of EUR 55 million or 13% compared to 2Q2012. This increase was driven by NCOU as well as by the Core Bank. The increase in NCOU was mainly attributable to IAS 39 reclassified assets. Higher provisioning in the Core Bank was mainly driven by a single client credit event in GTB along with higher provisions in CB&S and partly offset by reductions predominantly in PBC, where provision for credit losses continued to improve primarily reflecting a favorable environment in Germany.
Compared to 1Q2013 provision for credit losses increased by EUR 119 million, or 34%, which was driven by NCOU, primarily due to higher charges for IAS 39 reclassified assets. Provisioning in the Core Bank also increased driven by PBC and was partly offset by reductions in CB&S and GTB. The increase in PBC is a result of low levels in 1Q2013, which in part benefited from loan disposals, according to Deutsche Bank AG.
Noninterest expenses were EUR 6.9 billion in the quarter, up EUR 315 million, or 5%, compared to 2Q2012. The increase was primarily attributable to general and administrative expenses, which were EUR 3.6 billion, up EUR 305 million compared to 2Q2012, mainly due to higher litigation related expenses that were partly offset by lower expenses reflecting the ongoing implementation of the OpEx program. Compensation and benefits, were down EUR 179 million, reflecting lower compensation in CB&S as a result of the ongoing implementation of the OpEx program. Noninterest expenses from restructuring activities related to OpEx were EUR 192 million in 2Q2013. There were no such expenses in 2Q2012.
Noninterest expenses increased by EUR 327 million, or 5%, to EUR 6.9 billion versus 1Q2013. This was mainly due to higher noninterest expenses in CB&S, up EUR 202 million, or 7%, offset by lower total compensation and benefits. Noninterest expenses in the NCOU increased by EUR 180 million, or 34%, mainly driven by higher litigation related expenses.
Income before income taxes was EUR 792 million in 2Q2013 versus EUR 1.0 billion in 2Q2012, a decrease of 18%, according to Deutsche Bank AG.
Net income for 2Q2013 was EUR 335 million, compared to EUR 666 million in 2Q2012, a decrease of 50%. Income tax expense in the current quarter was EUR 457 million versus EUR 301 million in the comparative period. In the current quarter the effective tax rate of 58% was mainly impacted by expenses that are not tax deductible, which include litigation related charges, and adjustments for income taxes of prior periods. In 2Q2012, the effective tax rate was 31%.
“We are pleased to have reached our 2015 target of a Basel 3 Common Equity Tier 1 capital ratio of 10%, while simultaneously adding significantly to our reserves. We achieved this thanks to strong operating performance and disciplined asset reduction. Furthermore, we are committed to further reducing balance sheet in a manner that enables us to meet requirements on leverage ratio, sustain our value proposition to clients and strengthen our business model without materially impacting financial performance,” said Jürgen Fitschen and Anshu Jain, Co-Chief Executive Officers.
“Our Operational Excellence Program is enabling us to tighten our control environment, serve our clients better and improve the quality and efficiency of our infrastructure. A lot of work still lies ahead but we’re making steady progress, and so far the program is delivering improvements and cost savings in line with target,” the added.
“In the second quarter our core businesses performed well, our franchise remained strong, and we continued to reconfigure our platform to serve our clients more effectively. We took an important step toward our objective of placing Deutsche Bank at the forefront of cultural change with the launch of our new values and supporting beliefs. In the months ahead, together with our senior leaders from across Deutsche Bank, we will work on embedding these values,” they added.
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