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Top German lender Deutsche Bank AG surprised analysts by reporting profit during the third quarter as it continues to try to resolve the mortgage debacle confronting it.
The embattled bank revealed in a statement from Frankfurt Thursday that its net income for the third quarter was €278 million ($303 million), significantly beating analysts’ expectations. It had reported a loss of €6.01 billion during the same period a year earlier as a result of write-downs of its investment-banking and other assets’ value.
Analysts polled by Bloomberg News provided an average estimate of €394 million in loss for the quarter.
Net revenue in the quarter was €7.5 billion, 2.2 percent up from the figure for the same quarter a year ago. Trading revenue jumped 10 percent to $2.6 billion, mainly propelled by debt and currencies.
Revenue from debt and currency trading surged by 14 percent to reach $2.07 billion, surpassing analysts’ average estimate of €1.68 billion.
The surprise profit is the result of aggressive cost-cutting efforts by Chief Executive Officer John Cryan. The 55-year-old has cut jobs and sold risky assets in a bid to boost profitability and available funds. He has also suspended dividends.
However, Cryan feels his efforts at restructuring are being overlooked as a result of concerns over a hefty fine from the U.S. Department of Justice in connection with mortgage securities mis-selling.
“We continued to make good progress on restructuring the bank,” Cryan said in the release. “However, in the past several weeks, these developments were overshadowed by the attention around our negotiations concerning the residential mortgage-backed securities matter in the U.S. This had an unsettling effect.”
The Deutsche Bank CEO said aggressive effort is being put into seeing that the securities matter is resolved “as soon as possible.”
The bank revealed on Thursday that the Justice Department probe has weighed on its business volumes and the outflows of some assets. Last month, Cryan was forced to dismiss reports that the foremost German bank would be hit with a fine of $14 billion by the DOJ.
Investors are concerned over whether it has sufficient capital to cover possible losses and deal with regulatory requirements that may come as part of the probe.
Deutsche Bank shares have shed about 41 percent in 2016, more than twice the overall slump in the Stoxx Europe 600 Banks index. The stock is also the fourth-poorest performer on the Bloomberg Europe Banks and Financial Services Index.
The European lender made additional provision of €501 million for litigation costs during the third quarter, lower than the €650 million predicted by some analysts.
Earnings have been adversely affected by low and negative interest rates. These have especially impacted the profitability of the retail banking division. Sources also say increased concerns over the bank’s capital base have contributed to some hedge funds and other clients reducing their involvement with it in recent months.
Last October, Cryan promised to cut 9,000 jobs as part of his restructuring plan. But a major investor recently said that the total cuts need to be doubled to boost earnings, as reported by Bloomberg.