Wednesday 24 October 2018 7:46 am

Deutsche Bank profits beat expectations but investment banking slides


Deutsche Bank posted a faltering set of numbers this morning, experiencing falls in its corporate and investment bank as well as a drop in profit that still beat expectations.

The figures

Pre-tax profit plunged 46 per cent to €506m (£447m) year-on-year for the bank’s third quarter, it revealed today. However, these still surpassed analyst expectations of €328m.

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Net income was €229m, compared to €649m in the same period of 2017, as the bank undergoes a restructuring process.

However, revenue slipped nine per cent to hit €6.2bn, which Deutsche blamed partly on the performance of its corporate and investment bank (CIB).

Revenue at the German giant’s CIB stood at €3bn for its third quarter, 13 per cent lower than the same period a year ago. Meanwhile its global CIB transaction banking revenues dropped five per cent, and fixed income products fell 15 per cent.

Diluted earnings per share stood at €0.10, a third of what is was a year ago.

Why it’s interesting

Despite the drop in profits, Deutsche Bank predicts it is on track to be profitable for the first time in four years.

Its ongoing restructure saw it cut 1,450 jobs in the quarter, mainly in infrastructure as it moves to a cloud-based model, while hiring 750 graduates.

The bank expects to slash its workforce to below 93,000 by the end of the year as it sells its retail banking arm in Poland, and “well below” 90,000 by the end of 2019.

Yesterday Deutsche confirmed the hiring of a former Bank of England’s head of IT to lead its cloud transition, as boss Christian Sewing aims to ramp up the digitisation of global transaction banking.

That segment of its CIB division netted Deutsche €912m revenue this quarter, down from 964m the year before.

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Deutsche slashed front office headcount for its CIB arm this quarter, and said the focus is now squarely on driving growth and returns, saying it had a primary role in six of the largest 10 corporate finance transactions this quarter.

That comes after boss Sewing said the bank would stand by its international operations despite pressure from some investors to cut back, saying a “global presence” remains important for European banks.

What Deutsche Bank said

Christian Sewing, chief executive officer, said:

With profit before tax of €506m, 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. We are on track to be profitable in 2018, for the first time since 2014.