Deutsche Bank Seen Posting Fourth Trading Revenue Slump

Deutsche Bank AG may say trading revenue slid for a fourth straight quarter, underscoring the challenge facing a lender that has staked its future on the shrinking business.

Europe’s largest investment bank will probably report income from dealing in debt and currencies fell 10 percent to 1.63 billion euros ($2.2 billion) in the three months through June from a year earlier, according to the average estimate of eight analysts surveyed by Bloomberg News. Equity trading revenue will decline 12 percent to 691 million euros, according to the average of seven estimates.

Co-chief executive officers Anshu Jain, 51, and Juergen Fitschen, 65, are spending some proceeds from an 8.5 billion-euro share sale during the quarter to expand their share of the market in fixed income as competitors pull back. Global investment banks are cutting jobs to lift profit as economic stimulus measures by central banks reduce income from dealing bonds for investors. With interest rates at historical lows in much of the world, yields have trended lower, meaning investors are holding off trades.

“There’s still pressure on their revenues and the fixed income business is feeling the market environment,” Andreas Plaesier, an analyst at M.M. Warburg who recommends investors hold the stock, said by phone from Hamburg yesterday. “They’re still in a transition year and litigation and restructuring costs haven’t fallen as much as they’d like.”

Deutsche Bank, based in Frankfurt, is scheduled to publish second-quarter earnings before the market opens on July 29. The last time the bank’s income from dealing fixed income and equity for clients rose on an annual basis was in the second quarter of last year. The debt business accounted for 21 percent of the firm’s 31.9 billion euros in revenue last year, according to its filings.

U.S. Trend

The five biggest U.S. banks saw their combined revenue from trading fixed income, currencies and commodities fall 9.4 percent to $12.1 billion in the second quarter from a year earlier, data compiled by Bloomberg Intelligence show. In Europe, Credit Suisse this week posted higher-than-forecast profit at its investment bank, benefiting from a 14 percent increase in fixed-income revenue.

Net income in the three months through June will probably increase to 575 million euros from 334 million euros in the same period a year earlier, according to the average of nine estimates.

The stock has dropped 18 percent this year, the fifth steepest decline of 43 companies listed on the Bloomberg Europe Banks and Financial Services Index, which has risen 0.7 percent. The shares gained 1.6 percent to 27.33 euros at 9:57 a.m. in Frankfurt today.

Deutsche Bank’s non-interest expenses in the three months through June will probably fall to 6.77 billion euros from 6.95 billion euros in the second-quarter of 2013, according to the average of nine analyst estimates. The company will set aside 463 million euros for legal matters, the average of four estimates showed. The bank will pay 264 million euros of tax in the quarter, less than the 457 million euros for the year-earlier period, the average of five estimates showed.

The following is a table of average second-quarter estimates, year-earlier figures and results from the previous quarter, as well as the number of analysts surveyed. The data is in millions of euros.

                           Q2 2014   Q2 2013   Q1 2014    Number
                          Expected  Reported  Reported  Analysts
Revenue before loan
loss provisions              7,824     8,215     8,392        10
Net interest income
before loan-loss provisions  3,517     3,651     3,375         5
Loan-loss provisions           382       473       246         9
Fee and commission income    3,006     3,106     3,038         5
Personnel costs              2,995     3,203     3,349         2
Litigation costs               463       630         0         4
Non-interest expenses        6,765     6,950     6,466         9
Pretax profit/(loss)           847       792     1,680         9
Taxes                          264       457       577         5
Net income/(loss)              575       334     1,083         9
Common equity Tier 1 ratio
under full Basel III rules    11.2%      10%      9.5%         4

                           Q2 2014   Q2 2013   Q1 2014    Number
                          Expected  Reported  Reported  Analysts
Corporate Banking & Securities
Equity origination rev.        198       204       160         4
Debt origination rev.          359       417       358         4
Equity sales & trad. rev.      691       787       772         7
Debt & other products
sales & trading revenue      1,633     1,823     2,433         8
Advisory revenue               120       116       107         4
Loan products revenue          302       296       255         4
Total revenue                3,306     3,579     4,076         5
Non-interest costs           2,520     2,794     2,547         4
Pretax profit                  703       758     1,492         6

                           Q2 2014   Q2 2013   Q1 2014    Number
                          Expected  Reported  Reported  Analysts
Private & Business Clients:
Pretax profit                  479       507       520         7
Global Transaction Banking:
Pretax profit                  354       324       367         6
Asset & Wealth Management:
Pretax profit                  186        80       169         6
Non-Core Operations Unit:
Pretax (loss)                 (615)     (672)     (532)        6
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