By Jenny Strasburg and Pietro Lombardi
Deutsche Bank AG's global overhaul has taken another big bite,
with the German lender reporting a second consecutive quarterly
loss and broad revenue declines as it exits businesses and absorbs
Shares in the bank were down 6.8% in Wednesday morning trading,
making it the weakest performer in the Stoxx Europe 600 index.
The bank Wednesday reported a EUR832 million ($924 million)
third-quarter net loss, including a EUR1 billion pretax loss in the
new division where it has stashed businesses and positions it is
selling or winding down, called the Capital Release Unit.
Overall net revenue fell 15% to EUR5.3 billion. All but one of
the bank's four core divisions, the corporate bank, suffered
The results missed expectations, according to a consensus
forecast provided by FactSet. Analysts had expected a third-quarter
loss of about EUR772 million, while revenue had been forecast at
EUR5.53 billion, according to FactSet.
The results reflect the first quarter of post-overhaul reality.
Germany's biggest lender faces years of challenges cutting costs
while maintaining enough profit to pay for its restructuring,
without depleting too much of the capital buffer it needs to absorb
potential losses and satisfy regulators.
Deutsche Bank said its four core business divisions, including
its investment- and corporate-banking units and asset management,
were all profitable. Excluding the so-called bad-bank loss, the
core operations collectively had a pretax profit of EUR353 million
in the third quarter.
Chief Executive Christian Sewing said the bank's transformation
is on track, with a stable capital cushion, loan growth and
increase in assets being managed for clients. The bank said it is
also on track to meet its 2019 cost target.
The loan growth volume could concern investors cautious about
eroding soundness in the market. Deutsche Bank's finance chief,
James von Moltke, told reporters on a conference call that the
increase was consistent with the bank's strategy, and that it is
carefully gauging credit quality. He noted Deutsche Bank's
relatively stable provisions for loan losses, adding that those
provisions are likely to go up in future quarters, but calling that
an anticipated "normalization."
The bank said it is on track to meet its 2019 cost target,
though some analysts pointed out that third-quarter costs were
slightly higher than expected. The lender's head count has fallen
below 90,000 for the first time since it acquired German
retail-banking business Postbank, it said. In early July, Deutsche
Bank unveiled a big revamp including around 18,000 job cuts over
several years and a retreat from some of its global trading
In late July, it reported a big, but expected, second-quarter
net loss tied to restructuring costs. Drops in trading and
investment-banking revenue didn't help. That EUR3.15 billion
quarterly loss included a EUR3.4 billion restructuring charge.
Executives still expect Deutsche Bank to return to profitability
or at least break even next year, Mr. von Moltke said
In the reorganized investment bank, overall revenue fell 5% in
the third quarter, with the fixed-income sales and trading revenue
decline offset by a 20% increase in revenue from origination and
The fixed-income pain came largely from interest-rate trading
and emerging-markets debt, including losses in Argentina that Mr.
von Moltke declined to quantify. He called the fixed-income results
a "mixed picture" but said the bank is happy with areas like
currencies trading and predicts the overall business will
Corporate-bank revenue was up 6%, including an 8% increase in
transaction-banking revenue. Overall private-bank and
asset-management revenue were down 3% and 4%, respectively. DWS,
the asset-management arm, attracted net inflows.
Mr. Sewing has said the upfront restructuring pain will make
Deutsche Bank leaner and more focused on serving European companies
at home and abroad. The bank has largely exited from equities
trading and pulled back from other money-losing operations with the
aim of focusing on long-term strengths, such as managing companies'
cash and financing trade.
Mr. von Moltke told reporters that nothing in the results since
July has led the bank to consider closing more businesses or
lopping off more products than it already has planned or
But executives have also acknowledged that investors have heard
many restructuring promises before, only to be disappointed when
cuts failed to bring stability. The bank, which is almost 150 years
old, has had years of senior management turmoil and lost top
bankers. Investors aren't easily convinced that the latest plan
will succeed, either, analysts say.
Banks globally are suffering from low or negative interest
rates, with that prolonged weight on profits exacerbating Deutsche
Bank's already low-margin retail market in Germany.
Write to Jenny Strasburg at firstname.lastname@example.org and Pietro
Lombardi at Pietro.Lombardi@dowjones.com
(END) Dow Jones Newswires
October 30, 2019 06:06 ET (10:06 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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