The Deutsche Bank logo at a bank branch in the financial district of Frankfurt, Germany, Thursday, February 2, 2023.
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Deutsche Bank beat expectations on Wednesday as it returned to profit in the three months to September, after ending a 15th consecutive quarterly streak of profits in the second quarter.
Third-quarter net profit for shareholders was 1.461 billion euros ($1.58 billion), compared with expectations of 1.047 billion euros in an LSEG analyst survey.
Revenue reached 7.5 billion euros, compared with LSEG analysts’ forecast of 7.338 billion euros.
Other highlights from Season 3 include:
- Pre-tax profit was 2.26 billion euros, an annual increase of 31%.
- Provision for credit losses was 494 million euros, up from 245 million euros in the same period last year.
- The CET 1 capital ratio, a measure of bank solvency, was 13.8%, up from 13.5% in the second quarter.
- Return on tangible equity came in at 10.2% (7.6% if adjusted for lenders’ litigation terms), up from 7.3% in the year-ago period.
Germany’s largest bank posted a second-quarter loss of 143 million euros when it announced it would not launch a second share buyback program this year and take into account provision allocations for the long-running litigation over its acquisition of Postbank. About 60% of the plaintiffs in the lawsuit settled with the German bank in August on the grounds that Deutsche Bank did not pay enough for the purchase.
Deutsche Bank said a partial release of 440 million euros of litigation reserves in the third quarter helped boost profits and it has now directed it to apply for share buybacks – a step that had been stalled by Postbank’s legal action.
European banks, whose performance has been bolstered by heavy share buybacks and dividends in recent years, now face pressure to deliver earnings growth in a falling interest rate environment to keep pace with the profitability of their U.S. peers.
McKinsey analysts warned in the consultancy’s Annual Review of Global Banking 2024: “In retrospect, while the industry has reduced costs and maintained high credit quality, the improvement in returns since 2021 appears to be mainly due to interest rates rise.
Deutsche Bank launched comprehensive Cost savings drive The bank plans to reduce its workforce by 3,500 in 2025, including 800 job cuts announced last year.
Market participants are conducting a heated investigation into the wider banking sector after Deutsche Bank abandoned the prospect of a merger with domestic rival Commerzbank, which now faces a potential takeover by UniCredit.
Other European banks are also due to report third-quarter earnings in the coming days, with Barclays reporting on Thursday and Swiss giant UBS Group AG reporting next week.
This breaking news story is being updated.
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