Status: 10/27/2021 10:02 a.m.
Germany’s largest financial institution, Deutsche Bank, is still a long way from the billions in profits made by foreign competitors. Still, it made a profit in the third quarter as well.
Deutsche Bank closed the third quarter of the current year with a profit – despite declining income from investment banking, the bank’s most important source of income. After that, profit after taxes rose to 329 million euros in the period from July to September, after 309 million in the previous year. Minority interests and interest payments for certain bonds have to be deducted from this, so that the bottom line is that the shareholders have a profit of 194 million euros, slightly more than in the previous year and significantly more than expected.
In an international comparison, however, Deutsche Bank remains far behind in the bottom ranks. The Swiss UBS, with which the Frankfurt money house once liked to measure itself, achieved a profit of 2.3 billion dollars in the third quarter. The Spanish Santander Bank, which is also present in Germany, shows a surplus of 2.2 billion euros for this period – more than Deutsche Bank expects for the entire year.
Lower risk provisions
The fact that Deutsche Bank has nevertheless managed to post black figures for the fifth quarter in a row, although the costs for the ongoing renovation have risen by a good half a billion euros, is also due to the strong economic recovery. The provision for bad loans could be reduced by 156 million euros to 117 million euros. At the same time, personnel expenses fell by 142 million euros. The number of employees has dropped by 2,500 year-on-year to 84,500.
Deutsche Bank is in the middle of a comprehensive restructuring. Entire departments were closed, risky parts of investment banking were sold and extensive austerity measures were initiated. Around 18,000 jobs are to be cut worldwide by 2022. Yesterday it was announced that Postbank, which belongs to Deutsche Bank, wants to reduce the number of its branches from 750 to 550 by the end of 2023. That is more than planned last.
“We have now covered two thirds of the way with our renovation and we have always reached our milestones,” said CEO Christian Sewing. Overall, the financial institution has already shouldered 90 percent of the expected burdens from the transformation and is well on the way to having almost completely digested the renovation costs by the end of the year. “We are confident that we will achieve our goals for 2022,” emphasized Sewing. The CEO is aiming for an after-tax return of eight percent for 2022. The cost / income ratio should then be 70 percent. This means that 70 cents have to be spent for every euro of income. This metric was still 82 percent at the end of September.
Despite these successes, the bank fails to increase its income. They stagnated in the third quarter at around six billion euros. In investment banking they even fell to 2.2 billion euros. In the trading of fixed-income securities and currencies (FIC), which is important for the bank, revenues fell compared to the same quarter of the previous year by twelve percent to 1.6 billion euros. This means that the bank does worse than the competition in this line of business as well. America’s leading investment bank Goldman Sachs achieved a 63 percent profit boost in the third quarter.
In addition, Deutsche Bank is not making any headway in the private customer business. Here, the income even fell to two billion euros, in the corporate bank they stagnated. There was only a plus in asset management.
The numbers therefore caused disappointment on the stock exchange. The shares of Deutsche Bank, however, fell in the morning by around five percent at the end of the DAX. Although the money house earned more than analysts expected, investors still preferred to cash in. The numbers of competitors were better in comparison across the board, said a trader.
Deutsche Bank is still in the black
Sebastian Schreiber, HR, October 27, 2021 10:56 am