Deutsche Bank smashes profit estimates and boosts shareholder returns

Deutsche Bank on Thursday smashed fourth-quarter earnings expectations, reporting net profit of 1.3 billion euros ($1.4 billion) and announcing a further 1.6 billion euros in shareholder returns for 2024.

The quarterly net profit figure marked an almost 30% fall from the same quarter a year ago but was significantly higher than the 785.61 million euros expected by analysts. It follows net profit of 1.031 billion euros for the previous quarter and 1.8 billion euros for the same period last year.

Shares were 4.6% higher in morning trade in Europe.

The German lender also announced plans to hike share buybacks and dividends by 50%, returning a total of 1.6 billion euros to shareholders.

Deutsche said it is planning an additional share buyback of 675 million euros, which it aims to complete in the first half of the year. This follows 450 million euros of repurchases in 2023. It also plans to recommend 900 million euros in shareholder dividends for 2023 at its Annual General Meeting in May.

For the year as a whole, the bank reported 4.2 billion euros in net income attributable to shareholders — beating expectations of 3.685 billion euros expected by analysts.

“Pre-tax profit at 5.7 billion is at a high, we grew year-on-year despite some items that in this year created some noise, but what’s really exciting is the momentum we see in the business,” Deutsche Bank CFO James von Moltke told CNBC on Thursday.

“We had a 10% year-on-year growth in our investment bank in the fourth quarter, and admittedly in a year that was still retracing the very strong performances of 2021 and 22, so 9% down for the full year, but we see momentum especially now going into ’24 in origination advisory and very strong, I think consistent, performance in our FIC [fixed income and currencies] franchise.”

As part of a 2.5 billion euro operational efficiency program, Deutsche Bank said it expects to cut 3,500 jobs, mainly in “non-client-facing areas.”

As of the end of 2023, savings either realized or expected from completed measures under the efficiency program grew to 1.3 billion euros, the bank estimated. The program’s goal is to reduce the quarterly run-rate of adjusted costs to 5 billion euros, with total costs falling to around 20 billion in 2025.

In a statement Thursday, Sewing said the bank’s 2023 performance “underlines the strength of our Global Hausbank strategy as we help our clients navigate an uncertain environment.”

“We have achieved our highest profit before tax in 16 years, delivered growth well ahead of target and maintained our focus on cost discipline while investing in key areas,” Sewing said.

“Our strong capital generation enables us to accelerate distributions to shareholders. This gives us firm confidence that we will deliver on our 2025 targets.”

Other fourth-quarter highlights included:

• Net revenues grew 5% year-on-year to 6.7 billion euros, bringing the annual total to 28.9 billion.
• Net inflows of 18 billion euros across the Private Bank and Asset Management divisions.
• Credit loss provision was 488 million euros, compared to 351 million in the same period of 2022.
• Common equity tier one (CET1) capital ratio — a measure of bank solvency — was 13.7% at the end of 2023, compared to 13.4% at the end of the previous year.

Amid concerns about bank profitability and reports that the German government is considering a sale of some of its company holdings, including its 15% stake in Commerzbank, Deutsche has emerged as the subject of merger speculation in recent months.

However, CEO Christian Sewing told CNBC at the World Economic Forum in Davos, Switzerland that acquisitions were not a “priority” for Germany’s largest bank.

Correction: This article has been updated to reflect that Deutsche Bank’s results were released on Thursday.