Deutsche Bank beats profit expectations despite deal slump, strong euro

By Tom Sims and Matthias Inverardi

FRANKFURT (Reuters) -Deutsche Bank returned to a better-than-expected profit in the second quarter from a loss a year ago as trading earnings helped offset mixed results at its global investment banking division and a hit from the jump in the euro's value.

The figures on Thursday come midway through a crucial year for Deutsche as it winds up a three-year plan and attempts to meet a series of targets that some analysts doubt it will achieve.

"This puts us on track to meet our 2025 targets," CEO Christian Sewing said of the results.

Deutsche, Germany's largest lender, reported net profit attributable to shareholders of 1.485 billion euros ($1.75 billion) in the quarter, compared with a loss of 143 million euros a year earlier.

It was better than analyst expectations for a profit of around 1.2 billion euros, helped by strong trading income as markets remained volatile.

The loss a year earlier resulted from a large provision for an investor lawsuit, briefly interrupting a long profit streak as the bank recovered from steep losses over the past decade.

The quarterly earnings are part of a flurry of reports from Europe's biggest banks, as investors search for evidence on how lenders are weathering a weak economy, a strengthening euro and a trade war.

Deutsche said the profit in the first half of the year was the highest since 2007. Shares were up more than 4% in early trade.

Deutsche's investment bank, which operates from Sydney to New York, remained the biggest revenue generator in the quarter, though a postponement in deals weighed on the results.

Revenue at the overall division was up 3%, better than expectations for a meagre 0.5% increase.

Within the investment bank, revenue for fixed-income and currency trading, one of the bank's largest businesses, rose 11%, better than expectations for a 3.1% gain. Such revenue was up 14% at JPMorgan and rose 9% at Goldman Sachs.

Origination and advisory, after making big gains last year, saw a drop of 29%, compared with expectations for a 18% decline. Deutsche recently revamped key roles at the division.

Deal-making has slowed this year as U.S. President Donald Trump's tariffs on trading partners fanned turmoil in markets and sparked concerns about slowing economic growth.

The euro's recent strength against the dollar has worked against Deutsche Bank as it converts revenue earned in dollars back into euros.

CEO Sewing has called 2025 a "year of reckoning" as the bank faces a deadline to meet targets on costs and profitability. Deutsche Bank is also working to formulate financial goals for 2026.

Revenue growth at Deutsche's other two big divisions was muted.

Revenue at the retail division rose 2%, weaker than expectations for a 5% growth. The corporate bank saw a 1% fall in revenue, while analysts had expected no change.

The bank downgraded its full-year outlook for corporate bank revenue, saying it now will be "essentially flat" compared with previous guidance for "slightly higher" revenue.

($1=0.8493 euros)

(Reporting by Tom Sims and Matthias Inverardi, Editing by Rachel More, Miranda Murray, Mrigank Dhaniwala and Tomasz Janowski)