News & Analysis

Deutsche Bank shares spike is short lived despite positive earnings report

Andrew Saks, Wednesday, 28 July 2021

This morning, an interesting dynamic came about relating to the share price of one of the world's largest investment bank, Deutsche Bank.

The company, which is one of the most prominent interbank FX dealers with a large market share, has released its earnings for the last financial quarter, its net profit attributable to shareholders in the second quarter having amounted to a remarkable €692 million, almost double the analyst expectations of a profit of €372 million.

That is quite a set of results, and as a result, Deutsche Bank stock rallied this morning, but then a rather interesting thing happened, that being an almost immediate tailing off value, restoring it to very similar level to yesterday.

As of 1600 BST today, the share price stands at 10.52 EUR, which is almost identical to the 10.56 EUR on Thursday last week before the stellar earnings for the quarter were announced, making the reaction to the doubling of profit for the quarter very short lived indeed.

Deutsche Bank’s results were supported by a decrease in provisions set aside to counteract the effects of government lockdowns, which in Germany have been severe indeed. Provisions for credit losses were €75 million, down from €761 million a year earlier.

A particular point of interest is that Deutsche Bank's investment banking division, which includes its FX trading operations, has reported its strongest performance in seven years at the start of 2021, representing its strongest performance since 2014.

That particular sector has been significantly infiltrated by non-bank market makers such as XTX Markets and Citadel Securities which have been very astute in understanding the nature of Tier 1 dealing, however Deutsche Bank is clearly making significant attempts to claw some of its market share back.

In summary, this is a remarkable result for a bank that has not had an easy time over recent years, however the share price spike and then sudden fall back to average levels within a matter of two hours today is an interesting dynamic indeed.


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