New CEO's Rebound Plan Lifts Deutsche Bank, But Challenges Remain

For the first time in a while, Deutsche Bank DB came up in the headlines with good news. Germany’s biggest bank said Monday that its second quarter was much stronger than analysts had expected.

Deutsche expects to make about €700 million, which is more than twice the expected amount of €321 million. The pretax profit of €700 million is 62% more than the previous quarter. Revenue also exceeded expectations at €6.6 billion. The bank will release its full earnings report on July 25, but these preliminary results are certainly encouraging.

Christian Sewing, the new CEO who took the place of John Cryan this April, is progressing on his effort to cut costs through massive restructuring. Deutsche said its second-quarter costs would be €5.8 billion, which is €200 million less than current analyst forecasts and brings the bank closer to hitting its full-year target of €23 billion.

Sewing is accelerating cost cuts by decreasing various investment banking activities and is planning on cutting over 7,000 jobs by the end of 2019. The filing on Monday showed that the bank shed 1,700 jobs in the quarter.

As a response to this surprisingly positive earnings preview, shares in DB rose over 7%, hitting nearly two-month highs in the process.

Yet, despite the gain, the bank has still lost nearly two-thirds of its stock market value in the past three years and is down 35% in 2018 alone.

Though cost cutting may have been successful so far, trading income fell sharply, especially compared to that of its competing American banks, such as JP Morgan Chase JPM and Citigroup C.

Sewing still has a tough road ahead of him—a road which will see more jobs to cut and fights to stop clients from leaving. Deutsche Bank still has a long way to go after years of hardships, but hopefully, with this quarter signaling a change in course, Sewing’s bold movements will slowly turn things around for the bank.

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