Deutsche Bank CEO reassures on restructure as losses continue and revenue shrinks

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Deutsche Bank had announced a radical restructuring plan in July. Photo: Simon Dawson/Reuters

Deutsche Bank (DBK.DE) CEO Christian Sewing on Wednesday reassured investors that the banks sweeping overhaul remains on track, despite what one analyst called “weak” third quarter results.

Deutsche Bank’s revenue in the third quarter was €5.3bn (£4.5bn) and it made a pre-tax loss of €687m. Loss attributable to shareholders was €832m. Return on tangible equity, a key measure of bank performance, was negative 7.3%.

The quarterly figures represent the first full quarter since Deutsche Bank announced a radical restructure of the bank in July aimed at returning the profit to consistent growth and profit. The plan involves shutting Deutsche Bank’s stock trading business and cutting 18,000 jobs globally.

Deutsche Bank’s Capital Release Unit — a kind of ‘bad bank’ made up of positions Deutsche Bank is unwinding or businesses it intends to close — made a loss of €1bn in the quarter. CFO James von Moltke said on Wednesday that around 1,500 jobs were cut in the third quarter, but wouldn’t comment on how many jobs have gone since the restructure was announced.

Sewing highlighted better underlying performance at much of the bank once the cost of its turnaround plan is stripped out.

“Despite having launched the most comprehensive restructuring of our bank in two decades, we delivered profits in our four core businesses during the quarter and grew loans and assets under management,” Sewing said.

Excluding the performance of the Capital Release Unit, Deutsche Bank made a pre-tax profit of €353m.

“Transformation is fully underway with tangible progress on costs and de-risking,” Sewing said.

Analysts flagged concerns over declining revenues and weak bond trading. Revenue was down 15% on the €6.1bn Deutsche Bank took in during the third quarter of 2018.

“The decline in revenues can’t be masked,” Neil Wilson, chief markets analyst at Markets.com, said. “Bond trading is about all it has left in investment banking and the fixed income division posted a 13% drop in revenues.”

Shares in Deutsche Bank dropped 3.1% in Frankfurt.

Analysts had no consensus forecast for Deutsche Bank’s third quarter performance given the ongoing restructure. However, the results were broadly in line with what analysts at UBS had forecast. Analysts at the Swiss bank had forecast revenue of €5.4bn and a pre-tax loss of €1.1bn, driven by restructuring charges.

Deutsche Bank booked €186m in transformation charges in the three-month quarter and said restructuring costs for the year will reach €1bn. Deutsche Bank made a huge €3.1bn loss in the second quarter of 2019 as a result of the costly transformation plan.

“I want to thank our employees for their strong performance and commitment during this period of change, and our clients for the strong vote of confidence in our new strategy,” Sewing said.