Deutsche Bank (XE:DBK)
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3 Months : From Oct 2019 to Jan 2020
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 as it exits businesses and absorbs restructuring costs.
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.
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.
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, those 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 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 ambitions.
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.
The latest results reflect almost a full 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.
In the reorganized investment bank, fixed-income sales and trading revenue fell 13% in the third quarter, while origination and advisory revenue increased 20%. Corporate-bank revenue was up 6%, including an 8% increase in transaction-banking revenue. Overall private-bank and asset-management revenues were down 3% and 4%, respectively.
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.
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 03:29 ET (07:29 GMT)
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