Five consecutive quarters in the black is the institute’s longest profit in a long time.
(Photo: imago images / Hannelore Förster)
Frankfurt In the past quarter, Deutsche Bank generated its fifth quarterly profit in a row. Germany’s largest money house earned the bottom line – after deducting interest for subordinated bonds – a profit of 194 million euros, as it announced on Wednesday.
That is an increase of seven percent compared to the same period last year and more than the analysts had expected on average. Five consecutive quarters in the black is the institute’s longest profit in a long time.
CEO Christian Sewing was correspondingly confident. “We are thus on a very good way to achieve a return on the material equity of eight percent after taxes, which we have set for 2022,” he wrote in a letter to the employees.
In the third quarter, however, the after-tax return was only 1.4 percent. This was also due to the bank’s new cost initiatives, which had led to one-time renovation costs of 583 million euros. However, these expenses should lead to more savings in the coming quarters.
Top jobs of the day
Find the best jobs now and
be notified by email.
“Overall, we have already shouldered 90 percent of the expected burdens from the transformation and are well on the way to having almost completely digested the renovation costs by the end of the year,” emphasized Sewing.
After-tax return is expected to increase to eight percent by the end of 2022
In 2019, the bank initiated a profound restructuring of the institute, closed entire areas such as share trading and promised significant cost reductions. This should drive the after-tax return to eight percent by the end of 2022.
The rating agencies honor the course of the institute, Moody’s and Fitch have raised their credit ratings for the bank. For Sewing these are “important milestones”.
The fact that profits were higher despite the renovation costs was due to the bank’s higher total income – they rose by two percent to six billion euros – and significantly lower loan loss provisions.
Deutsche Bank once again earned the most money in investment banking. It is true that the pre-tax profit there was EUR 861 million, ten percent lower than in the previous year. With that, the investment bank still fared significantly better than analysts had expected. This was largely due to revenue from advisory business on mergers and acquisitions and growth in debt and equity issuance.
The bank made progress in its stable business areas such as the private and corporate customer segments, which were slowed down for a long time by the low interest rates and later by the corona pandemic. Sewing had promised to increase the importance of stable business areas, but investment banking in particular shone during the corona pandemic.
Corporate customer business fared significantly better than in the previous year
But now the first progress has been made in the other divisions: In particular, the corporate customer business performed significantly better than in the previous year with a pre-tax profit of 292 million euros.
Among other things, the division benefited from the fact that it was able to issue more loans again. The recovery in world trade may have contributed to this – the institute is very active in trade finance. In addition, the bank has meanwhile enforced negative interest rates for many of the high deposits of corporate customers. The declining risk provisioning for loans at risk also supported the results.
The private customer division also earned more money again after losses in the previous year. The institute achieved higher income, especially in business with wealthy customers.
However, there were setbacks in the German private customer business. However, this was also due to the consequences of the ruling by the Federal Court of Justice, which obliged banks to actively obtain approval for price changes from customers. The bank put the charges at 98 million euros. In the fourth quarter, the burdens are expected to be significantly lower.
Even at the fund subsidiary DWS, which is under pressure because of the allegation of greenwashing, business was better than in the previous year.
Despite the progress, Sewing urged the workforce to discipline. “Our shareholders expect us to achieve our target return of eight percent. Let’s not repeat the mistake of yesteryear: that we lose pace when we’re back on track, ”he wrote.
In the spring of next year, the bank plans to give an update on its strategy at an investor’s day.
More: Deutsche Bank will close 200 Postbank branches by the end of 2023.