Troubled Deutsche Bank accelerates restructuring

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FRANKFURT, Germany (AP) — Germany's struggling Deutsche Bank said Wednesday that its net profit fell less than expected in the second quarter as it was making quicker progress in cutting costs and reshaping its business model after three straight years of losses.

Net profit fell to 401 million euros ($467 million) from 466 million euros a year earlier, above analyst estimates for 209 million euros.

The Frankfurt-based said the number of employees fell by 1,700 to 95,400, and management confirmed its target of fewer than 93,000 employees by year end and "well below" 90,000 by the end of 2019.

CEO Christian Sewing, who took over in April with a mandate to speed the bank's transformation, said the results were "a step in the right direction" but acknowledged that "we have much more work to do to generate acceptable returns for our shareholders."

The strong European economy helped the results. Set-asides for bad loans were only 86 million euros at the commercial lending business, near what the bank said were "historic low levels."

The bank had announced July 16 that results would come in well ahead of expectations — a welcome boost for Sewing. He replaced John Cryan in April after the bank's turnaround effort was slow to show results. Germany's largest lender has struggled with low profits and high costs, and with billions in charges for regulatory and legal violations. The bank agreed in late 2016 to pay $7.2 billion as part of a settlement with U.S. authorities over its sales of bonds backed by mortgages to people with shaky credit.

Sewing has said the bank will cut personnel at its investment banking business — source both of high costs and volatile profits — and scale back its global ambitions to compete with U.S. peers on Wall Street by focusing its international activities on European and German clients, as well as by cutting back on activities where it doesn't hold a market-leading position.

The bank's earnings paled in comparison to results for the quarter on Wall Street, where Goldman Sachs, Morgan Stanley, Bank of America, Citigroup and JPMorgan all turned in large increases in net profit with help from U.S. tax cuts and a strong economy. Chief Financial Officer James von Moltke said "we're going through a restructuring at a time when a number of our peers are not."

"That said, we think we've got a foundation from which to build."

The company's cost-cutting benchmark, called adjusted costs, fell 1 percent to 5.6 billion euros as management cut back on outside services and vendors. Sewing vowed that the bank would meet its target for the year of 23 billion euros in adjusted costs.

Earnings were hurt by lackluster results from buying and selling securities. Revenue from bonds and currency trading fell 17 percent, while stock trading revenue was off 6 percent.

The bank's shares traded down 1.3 percent after the announcement at 10.31 euros, about where they were on July 16 after the bank's early earnings release sent them sharply higher.

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