Germany's biggest lender Deutsche Bank reported tumbling profits and ebbing revenues in the third quarter Wednesday, failing to meet analyst forecasts as its latest restructuring weighs on performance.
Net profit at the Frankfurt-based group fell 65 percent year-on-year between July and September, to 229 million euros ($263 million), short of analysts' forecasts for a 240-million-euro bottom line.
But a 9.0-percent slide in revenues, to 6.2 billion euros, was more concerning for executives and observers alike.
"We have not yet achieved a turnaround in terms of revenues," chief executive Christian Sewing told employees in an open letter published on the bank's website.
Worse still, over the full year, Deutsche said it expected revenues "slightly lower" than in 2017 -- a downgrade from its flat forecast issued at the end of the second quarter.
JP Morgan analysts said Deutsche "has done an excellent job under Sewing in respect to leverage and capital ratio and being on track for cost reduction."
But they were less confident than the Deutsche boss about the outlook.
"We remain concerned about DB's inability to turnaround... revenues" in some vital business areas, they warned.
Mindful of past years when it was described as a threat to European and global financial stability, the bank highlighted a so-called "CET1" capital ratio -- measuring its buffer to absorb potential losses -- of 14 percent, slightly higher than the previous quarter.
- Refocus on Europe -
On taking office in April, Sewing heralded yet another round of restructuring, after years of Deutsche struggling to overcome the legal and financial hangovers of its pre-2008 crisis attempt to compete with Wall Street investment banking giants.
Deutsche aims to slash a total of 7,000 jobs by the end of 2019.
That burden and lower client fees for the bank weighed on the bottom line.
The investment banking arm, still recovering from a dizzying sequence of legal entanglements and especially hit by staffing cuts, saw revenues fall 13 percent year-on-year.
Deutsche's international payments business, a historically reliable source of income where the firm is continuing to invest, booked revenues down 5.0 percent.
Meanwhile revenues for the group's asset management division DWS fell 10 percent and the retail and commercial banking arm shed 3.0 percent.
- Cost cutting -
Sewing's efficiency drive has borne some fruit, as Deutsche's costs fell 1.0 percent year-on-year to 5.6 billion euros.
The group reported restructuring and severance costs of 103 million euros between July and September, some linked to the departure of 1,450 employees.
Job cuts are set to continue, with management aiming to reduce Deutsche's payroll to 93,000 by December and 90,000 by the end of 2019.
Cost discipline produced a a pretax profit of 506 million euros, which Sewing hailed as "another milestone on the way to becoming a sustainably profitable bank" -- although it was still 46 percent below the same quarter in 2017.
Looking ahead to the full year, the bank expects to report a net profit for the first time since 2014, not least because no legal settlements in the hundreds of millions or even billions are on the horizon as in previous years.
Nevertheless, investors shunned Deutsche in Frankfurt, with the stock falling 3.4 percent to 9.00 euros by 12:15 pm (1015 GMT), against a DAX index of blue-chip German shares up slightly on the day.
Germany’s biggest lender Deutsche Bank reported tumbling profits and ebbing revenues in the third quarter Wednesday, failing to meet analyst forecasts as its latest restructuring weighs on performance.
Net profit at the Frankfurt-based group fell 65 percent year-on-year between July and September, to 229 million euros ($263 million), short of analysts’ forecasts for a 240-million-euro bottom line.
But a 9.0-percent slide in revenues, to 6.2 billion euros, was more concerning for executives and observers alike.
“We have not yet achieved a turnaround in terms of revenues,” chief executive Christian Sewing told employees in an open letter published on the bank’s website.
Worse still, over the full year, Deutsche said it expected revenues “slightly lower” than in 2017 — a downgrade from its flat forecast issued at the end of the second quarter.
JP Morgan analysts said Deutsche “has done an excellent job under Sewing in respect to leverage and capital ratio and being on track for cost reduction.”
But they were less confident than the Deutsche boss about the outlook.
“We remain concerned about DB’s inability to turnaround… revenues” in some vital business areas, they warned.
Mindful of past years when it was described as a threat to European and global financial stability, the bank highlighted a so-called “CET1” capital ratio — measuring its buffer to absorb potential losses — of 14 percent, slightly higher than the previous quarter.
– Refocus on Europe –
On taking office in April, Sewing heralded yet another round of restructuring, after years of Deutsche struggling to overcome the legal and financial hangovers of its pre-2008 crisis attempt to compete with Wall Street investment banking giants.
Deutsche aims to slash a total of 7,000 jobs by the end of 2019.
That burden and lower client fees for the bank weighed on the bottom line.
The investment banking arm, still recovering from a dizzying sequence of legal entanglements and especially hit by staffing cuts, saw revenues fall 13 percent year-on-year.
Deutsche’s international payments business, a historically reliable source of income where the firm is continuing to invest, booked revenues down 5.0 percent.
Meanwhile revenues for the group’s asset management division DWS fell 10 percent and the retail and commercial banking arm shed 3.0 percent.
– Cost cutting –
Sewing’s efficiency drive has borne some fruit, as Deutsche’s costs fell 1.0 percent year-on-year to 5.6 billion euros.
The group reported restructuring and severance costs of 103 million euros between July and September, some linked to the departure of 1,450 employees.
Job cuts are set to continue, with management aiming to reduce Deutsche’s payroll to 93,000 by December and 90,000 by the end of 2019.
Cost discipline produced a a pretax profit of 506 million euros, which Sewing hailed as “another milestone on the way to becoming a sustainably profitable bank” — although it was still 46 percent below the same quarter in 2017.
Looking ahead to the full year, the bank expects to report a net profit for the first time since 2014, not least because no legal settlements in the hundreds of millions or even billions are on the horizon as in previous years.
Nevertheless, investors shunned Deutsche in Frankfurt, with the stock falling 3.4 percent to 9.00 euros by 12:15 pm (1015 GMT), against a DAX index of blue-chip German shares up slightly on the day.
