Deutsche Bank Brutalized By European Economic And Political Malaise

| About: Deutsche Bank (DB)

Summary

Deutsche Bank Q2 income losses 98% from last year.

Revenues decrease 23%.

A continued restructuring process is attempting to cope with struggling European banks.

Share values are down 45% for the year.

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Second Quarter Report

Deutsche Bank AG (NYSE:DB) reported steep Q2 income losses down 98% from a year earlier. Net income of only $22 million dwarfs the $818 million reported then. Share values are down 45% so far this year falling 3.15% Wednesday. Shares have fallen 20% in the five weeks since the Brexit decision which has shaken many European banks that run big operations from London hubs.

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Courtesy of the Author

Earnings Retreat

Revenues decreased by 23% as its largest core securities and sales division's profits shrank.

Investment-banking revenues fell from the previous year to $1.9 billion, a decline of 12%.

Restructuring

Weak market conditions have initiated multi-year restructuring by cost cutting, selling assets and requiring more stringent capital requirements during the next three years.

Additionally, the bank is engaged in settling regulatory requirements that could result in financial losses requiring the payment of fines to resolve pending lawsuits.

Conclusion

In general, "a lagging economy, messy politics and negative interest rates have combined to brutalize European lenders." European banks face a health check Friday when the "European Banking Authority releases results of a stress test that models how well their capitalization hold up under hypothetical economic slumps."

The ECB hopes the tests will banish fears about the health of European banks, which were pummeled during the financial crisis, and restore investor trust and revive lending to euro zone households and companies a key to getting economic recovery back on track.

Take Away

Watch the banks!

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