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Deutsche Bank CFO Says 'Very Hard' To Say When Revenues Will Pick Up Again

Deutsche Bank CFO Says 'Very Hard' To Say When Revenues Will Pick Up Again
Struggling to predict when revenues will improve is Germany's flagship lender.
Amid a weak market and the ongoing turmoil of a major restructuring program, Deutsche Bank reported an almost 10 percent drop in revenue in the three months through September on Thursday, versus the year before.
Deutsche Bank's Chief Financial Officer, James von Moltke, said Thursday that this would be "very hard to answer", when asked when exactly investors could expect revenues to pick up.
"We swim in a pool with our competitors and particularly the capital markets environment has been weak in the past couple of quarters, so we're looking for that to pick up," he added.
Beating analyst expectations despite a significant drop in investment bank revenue, the bank posted a strong increase in third quarter net profit on Thursday. The doubling of profits to 649 million euros ($768 million) in the quarter was helped by further cost reductions. Net profit came in at 278 million euros for the same period last year.
At the same time, slipping 9.6 percent to 6.8 billion euros was revenues at the bank. Deutsche Bank would need to "manage costs carefully" until that time while an improvement in the bank's revenues depended on investor engagement, von Moltke said.
In recent months, banks have been hit by a stubbornly low-interest rate environment, depressed trading volumes and low market volatility, and therefore the decline in revenues had been widely expected.
The German bank was lagging behind its U.S. peers, showed Deutsche Bank's third-quarter revenues. Deutsche Bank's fixed income performance in the third quarter was "very much in line" with the bank's stateside peers, insisted von Moltke when asked about its performance in relation to the lender's U.S. rivals.
However, in the three months through to September, in terms of equities the lender had fallen behind its rivals, he conceded.
When compared to the same period in 2016, major U.S. investment banks' bond trading revenues dipped 22 percent on average, Reuters reported. Due to reduced market volatility and decreased client activity, revenues in Deutsche Bank's bond trading division slumped 36 percent in the third quarter.
Von Moltke cautioned over the manner in which the ECB appeared set to unveil the fate of its massive bond-buying program even while he confirmed the Frankfurt-based lender was positively exposed to a rise in interest rates.
In signalling to the market how the U.S. central bank was likely to remove such stimulus, he believed the Federal Reserve had been "very successful", Deutsche Bank's CFO said. However, uncertainty over how the ECB would act still prevailed in Europe.

"There's uncertainty as to how that will play out — that uncertainty could certainly help our businesses because again we are talking about volatility being low in the markets. And that's been a dampener on revenues in the last several quarters," he concluded.

Christopher J. Mitchell

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