Litigation costs weighed heavily on Deutsche Bank profits this quarter.
The lender balanced out a 17% revenue rise with a hike in legal expenses to €1.2 billion from €757 million last year.
John Cryan, the brand new CEO who took over at the start of the month, made a damning assesment in a statement, calling costs “unacceptably high.”
“Solid revenue growth underscores the fundamental strengths of our businesses and the commitment of our people. However, our challenges are also evident in 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.”
Here are the main points:
- Profit before income taxes was €1.2 billion in the second quarter, compared with €917 million last year.
- Group net revenues were €9.2 billion, an increase of €.3 billion, or 17%. Around €570 million of the revenue growth was down to “favorable foreign exchange movements.”
- Provision for credit losses was €151 million, a decrease of €98 million, or 39%, compared with last year.
Cryan, who took over when previous CEO Anshu Jain was ousted earlier this year, hinted he’d make big changes inside the bank.
“We must be disciplined in how, where and with whom we do business. We must critically review any countries, business lines, products, and relationships that are unattractive. We must shrink our balance sheet, focusing on our many low-return assets.”
And there may be bad news for middle managers coming down the line:
“We must reduce organizational complexity, which inhibits effective decision making, blurs accountability and embeds wasteful cost.”