Despite Crown Crisis: Deutsche Bank Shares Turn Negative: Deutsche Bank Surprises With Third Quarter Profit | Message

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Despite the unprecedented economic meltdown due to the Crown crisis, Germany’s largest financial institution was consistently profitable in 2020, CEO Christian Sewing said Wednesday: “After nine months, our profit amounts to € 846 million before taxes, so we are still confident for the full year. to achieve a positive pre-tax result “.

In the third quarter, the institute, which is in the midst of a major restructuring, performed better than management had planned and analysts had expected: before tax it was expected to increase by 482 million euros, after the taxes was 309 million euros. Interest payments to holders of certain subordinated bonds must be deducted from this, so that shareholders of the DAX group in Frankfurt have made a profit of 182 million euros. A year earlier, the group’s restructuring initiated in July 2019 had caused deep red numbers.

With the radical restructuring of the group, Deutsche Bank wants to get back on the road to success after a series of years of losses. The internal investment bank’s long-running loss-making business was curtailed and the bank withdrew from global equity trading. Sewing wants to reduce costs significantly and is aiming for an 8% return on equity by 2022.

The bank is sticking to its 18,000 job downsizing target, “but the most important goal is cost reduction,” said CFO von Moltke. According to media reports, IT subsidiary Postbank Systems, which provides IT services for Deutsche Bank’s subsidiary Postbank, is on the cross-list. Indian software provider Tata Consultancy Services is interested in taking over the company with 1,400 employees. Deutsche Bank is currently merging the IT systems of the parent company and the subsidiary.

Overall, Deutsche Bank wants to reduce the number of full-time positions in the group from approximately 18,000 to 74,000 worldwide by the end of 2022. At the end of September 2020, the number of full-time positions was 86,984. In Germany’s domestic market, the institute wants to cut one branch every fifth and restrict the network to 400 locations.

“In the fifth quarter of our transformation, in addition to our cost discipline, we also demonstrated that we could gain market share,” said Sewing. “Our focused business model is paying off and we expect a significant portion of our earnings growth to prove sustainable.” Analysts had expected an average loss for the three-month period from July to September 2020.

The positive performance in the third quarter was due, among other things, to the increase in revenues: investment banking proved to be an important pillar in this case, while revenues in the private client bank stagnated and the division was even slipped into red.

The austerity measures introduced also contributed to the positive interim result, as did the fact that Deutsche Bank, with € 273 million, saved much less money for possible insolvencies than in the first two quarters. Since the beginning of the year, the DAX Group has invested a whopping 1.5 billion euros in risk provisions for loans in danger of repayment, more than three times the same period last year. The economic consequences of the corona pandemic have raised concerns among banks around the world that crisis-afflicted borrowers will not be able to repay their loans.

“In the third quarter, we increased our earnings by 13% year-on-year and at the same time reduced our expenses by 10%,” Sewing wrote in a message to the workforce. “We are on track to our 2022 return target.” In the current year, the bank’s costs are expected to drop to 19.5 billion euros. It would be 3.3 billion less than in 2018. Sewing sees the bank “completely on course” towards this goal.

Meanwhile, the subsidiary of the DWS listed fund continued to benefit from cost reductions and high cash flows. In the third quarter, net profit rose 31% year-on-year to 151 million euros. DWS’s total income at 558 million euros was slightly less than the previous year’s 560 million euros, while the adjusted costs for specialty items fell 12 percent to 342 million euros thanks to staff savings. The medium-term goal of bringing the cost-to-income ratio below 65% is already achievable this year and therefore a year ahead of schedule, according to DWS management around CEO Asoka Wöhrmann.

Deutsche Bank shares turn red after unexpectedly good quarterly data

However, Deutsche Bank stock was unable to fully escape the fear of a second freeze due to the pandemic. The newspaper initially lost about five percent in the morning via XETRA. Then the price rose and in the late morning Deutsche Bank stock was one of the few winners of the DAX with a 1.67 percent rise to € 8.04. At the close of trading, however, the stock fell again by 1.91 percent to 7.76 euros.

In other ways, too, the long-mistreated Deutsche Bank stock did relatively well in the Crown crisis. Since the beginning of the year, its price has risen by around 17% and has thus developed more strongly than any other share in the European Stoxx Europe 600 Banks industrial index.

Anke Reingen of analyst firm RBC spoke of a strong series of figures. He assessed the continued good cost control and the progress made with the core capital ratio as positive. The bank’s third quarter was better than expected, analyst Kian Abouhossein of US bank JPMorgan commented positively. The development in the fixed income sector is particularly encouraging.

Although the krona crisis severely impacted some banks’ stock prices this year, long-battered Deutsche Bank shares held up rather well. This previous annual balance is more than 15 percent. In the meantime, however, things have become very hectic: from the beginning of the year to mid-February the price has risen to 10.37 euros. Then, in the wake of the collapse of the crown on the financial markets, it fell to an all-time low of € 4.449 in mid-March. The price then temporarily climbed back to around EUR 9.20 and then temporarily returned below the EUR 7 level at the end of September.

FRANKFURT (dpa-AFX)

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