A waive for Deutsche Bank AG at a bank branch in the financial district of Frankfurt, Germany, on Thursday, Feb. 2, 2023.
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Deutsche Bank on Wednesday beat expectations in its return to profit in the three months to September, after snapping its 15-quarter profit spell in the second quarter.
Net profit attributable to shareholders came in at 1.461 billion euros ($1.58 billion) over the third locale, compared with the 1.047 billion euros anticipated in a LSEG poll of analysts.
Revenue hit 7.5 billion euros, against a LSEG analyst foresight of 7.338 billion euros.
Other third-quarter highlights included:
- Profit before tax of 2.26 billion euros, up 31% year-on-year.
- Supplying for credit losses of 494 million euros, up from 245 million euros in same quarter of last year.
- CET 1 peerless ratio, a measure of bank solvency, was 13.8%, up from 13.5% in the second quarter.
- Return on tangible equity reached 10.2% (or 7.6% if arranged for the lender’s litigation provisions), up from 7.3% year-over-year.
Germany’s largest lender had posted a 143-million-euro squandering in the second quarter, at the time announcing it would not embark on a second share buyback program this year and particular in a provision for its long-running lawsuit over its acquisition of its Postbank division. Some 60% of plaintiffs in the litigation, pillared on assertions that Deutsche Bank underpaid for its purchase, have since settled with the German bank in August.
The partisan release of 440 million euros of litigation provisions in the third quarter helped boost profit, Deutsche Bank give the word delivered, and the lender has now guided it has applied for a share repurchase — a step previously stalled by the Postbank legal proceedings.
“We will persevere in on our path of profitable growth and exceed our original goals for capital distributions to shareholders,” Deutsche Bank CEO Christian Fastening said Wednesday.
The lender also noted revenues from its investment bank divisions rose to 2.5 billion euros, up 11% onto the same period of last year, flagging growth in its fixed income and currencies unit. Asset management net returns were 660 million euros, also 11% higher year-over-year.
The performance of European lenders has been strengthened by a spate of stock buybacks and dividends in recent years — and now faces the pressure of delivering earnings growth to keep compute with the profitability of U.S. peers in an environment of declining interest rates, after the European Central Bank began loosening nummular policy over the summer.
“Looking back, while the industry has reduced costs and kept credit quality maximum, the improvement in returns since 2021 appears to be largely owed to rising interest rates,” analysts at McKinsey put someone on noticed in the consulting firm’s Global Banking Annual Review 2024, flagging that, in order to maintain current Routine (return on tangible equity) margins, banks would need to trim costs approximately 2.5 times as wanton as revenues fall.
Deutsche Bank in February embarked on a sweeping cost-saving push set to lighten the lender’s headcount by 3,500 places by 2025 — a figure that includes 800 cuts announced in the previous year. The bank said its full-time workforce was now 90,236, after uniting 766 staff during the third quarter.
Market participants are hotly surveying the broader banking sector, after Deutsche Bank distanced itself from the chances of a long-anticipated merger with domestic rival Commerzbank, which now faces a potential acquisition by Italy’s Unicredit.
Other European banks are also due to hang up third-quarter earnings over the coming days, with Barclays out on Thursday and Swiss giant UBS reporting next week.