Deutsche Bank swings back to profits in third quarter

23rd Oct 2024 08:40

(Sharecast News) - Deutsche Bank returned to profitability in the third quarter, it emerged on Wednesday, as it reported a net profit of €1.46bn, surpassing analyst expectations of €1.05bn.

It marked a significant recovery after posting a loss of €143m in the prior quarter, driven partly by provisions for a long-running lawsuit related to its acquisition of Postbank.

The litigation, which claimed the bank had underpaid for the acquisition, saw 60% of plaintiffs settle in August, leading to a partial release of €440m in legal provisions, contributing to the improved earnings.

Revenue for the quarter reached €7.5bn, exceeding forecasts for €7.34bn, with notable performance in its investment banking division.

Revenue from the investment bank grew 11% year-on-year to €2.5bn, supported by gains in the fixed income and currencies unit.

Asset management also saw an 11% rise in net revenues, reaching €660m.

Profit before tax rose 31% to €2.26bn, while provisions for credit losses nearly doubled to €494m, reflecting a cautious approach amid economic uncertainty.

The bank's CET1 capital ratio improved slightly to 13.8%.

Deutsche Bank said it had also renewed its cost-saving initiative, which aimed to reduce headcount by 3,500 roles by 2025, including 800 cuts previously announced.

However, the bank added 766 staff during the third quarter, bringing its workforce to 90,236.

Shares in the German lender were up around 30% for the year-to-date, but despite the strong results on Wednesday, they dipped at the open in Frankfurt.

"The third quarter was marked by a further escalation in the Middle East conflict, even fiercer fighting in the war in Ukraine and some larger-than-expected interest rate cuts," said chief executive officer Christian Sewing.

"Many of these developments have a direct or indirect impact on markets and thus on our clients, and our most important task is to support them with our expertise.

"Our third-quarter results show that we succeeded in this task - in the months from July to September, we increased our revenues by 5% year-on-year to €7.5bn."

Sewing added that the company's pre-tax profit increased 31% to €2.3bn, with net income of €1.7bn, although the figures were again impacted by the litigation surrounding the takeover of Postbank - this time to Deutsche's advantage, however.

"While we had to record a provision of €1.3bn in the second quarter, we were now able to release approximately €440m of this after reaching settlements with the bulk of the plaintiffs.

"We are now covered for all scenarios that may arise as a result of today's hearing at the Higher Regional Court of Cologne.

"The remaining provision would also fully cover a court decision that did not go in our favour."

At 0924 CEST (0824 BST), shares in Deutsche Bank were down 4.01% in Frankfurt at €15.66.

Reporting by Josh White for Sharecast.com.