Deutsche Bank Q3 Profit Down 65%, Stock Plunges

by Ike Obudulu Posted on October 24th, 2018

Deutsche Bank’s (DBKGn.DE) bleak third quarter results and revenue forecast overshadowed its assertion on Wednesday that it is on track to return to profit this year, knocking its shares.

After three years of losses, a failed stress test, several attempts to restructure, a leadership shake-up and a ratings downgrade, many investors have lost faith in Germany’s biggest bank, whose shares have fallen by 43 percent this year.

Although Deutsche Bank said that it was on track to make a profit this year, it posted a steep fall in third quarter profit as it restructures under new chief executive Christian Sewing.

Its shares were down by 4.5 percent after the bank said it expected revenue this year will fall from 2017.

“We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014,” Sewing said.

Shares of Deutsche Bank AG (DB) were losing around 4 percent in the early morning trading in Germany after the banking giant reported Wednesday weak profit and revenues in its third quarter, with lower results in all divisions. Looking ahead, the company said it is on track to be profitable in 2018, for the first time since 2014.

Further, Deutsche Bank reaffirmed its targets to reduce the workforce to below 93,000 by the end of 2018 and well below 90,000 by the end of 2019. On a full-time equivalent basis, the number of employees was 94,717 at the end of the quarter, a net reduction of approximately 700 during the quarter.

Christian Sewing, Chief Executive Officer, said, “With profit before tax of 506 million euros, this result is another milestone on our way to becoming a sustainably profitable bank. We have our costs under control and sufficient capital to grow.”

For the third quarter, net income plunged to 229 million euros from last year’s 649 million euros. Earnings per share fell to 0.10 euro from 0.30 euro a year ago.

Profit before tax was 506 million euros for the quarter, versus 933 million euros in the prior year.

Net revenues were 6.18 billion euros, down 9 percent from 6.78 billion euros last year. The decline was partly reflecting the non-recurrence of certain specific items in the prior year quarter, as well as lower volatility and reduced client volumes in the Corporate & Investment Bank or CIB in the latest quarter.

CIB net revenues fell 13 percent to 3 billion euros, with 5 percent drop in Global Transaction Banking revenues and 15 percent decline in Fixed Income Sales & Trading revenues. Equity Sales & Trading revenues declined 15 percent.

The Private & Commercial Bank or PCB net revenues were 2.5 billion euros, down 3 percent. Asset Management net revenues declined 10 percent.

In the quarter, assets under management rose by 2 billion euros to 694 billion euros, as market performance and exchange rate movements more than offset net outflows.

The provision for credit losses declined to 90 million euros from last year’s 184 million euros.

The company said it has made further progress meeting near-term adjusted cost and headcount targets.

In Germany, Deutsche Bank shares were trading at 8.97 euros, down 3.69 percent.

JPMorgan Chase Bank said in a research note that it was “concerned about DB’s inability to turn around” key areas such as fixed income and equity sales and trading and its transaction bank.

Sewing took over in April and plans to cut more than 7,000 jobs. Headcount at the end of the quarter was 94,717, down by about 700 during the quarter.

In contrast to Deutsche Bank, some big U.S. banks have posted sharp gains. Goldman Sachs (GS.N) reported a 20.5 percent increase in quarterly profit as growth in its equities trading and underwriting businesses made up for a fall in fixed income trading.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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