Finance Industry News

Deutsche Swings Back Into Profit, Qatar Funding Speculation Continues

Deutsche Bank, which operates in regions including Asia-Pacific, swung back into a pre-tax profit for the first time since 2014, logging a figure of €1.3 billion ($1.49 billion) for 2018, a rise of 8 per cent on a year earlier. However, the banking group, which is continuing to battle back towards financial health, logged a pre-tax loss of €319 million in the final three months of last year, narrowing from €1.4 billion a year before.

Non-interest costs fell by 5 per cent in 2018 to €23.5 billion; adjusted costs of €22.8 billion fell by 5 per cent, below the lender’s full-year 2018 target of €23.0 billion, it said in a statement.

The bank has cut its headcount, shrinking the payroll to around 91,700 at the end of last year, on track to meet the bank’s year-end target of below 93,000, on a full-time equivalent basis, it said. Cuts more than offset hiring in growth areas and control functions.

“Now, our priority is to take the next step. In 2019 we aim not only to save costs but also to make focused investments in growth. We aim to grow profitability substantially through the current year and beyond,” Christian Sewing, group chief executive, said.

The Frankfurt-listed bank said that it has cut its 2019 adjusted cost target to €21.8 billion, down from a previous €22.0 billion figure, thanks to the progress it made last year. By the end of 2019, Deutsche Bank wants to contract its payroll to “well below 90,000”.

The results were achieved in spite of a 4 per cent year-on-year fall in revenues, at €25.3 billion.

At the end of the year, the bank had a Common Equity Tier 1 capital ratio – a standard way for a bank to report its capital buffer – of 13.6 per cent, above its 13 per cent target.

Deutsche Bank, along with a number of other financial bodies, has been hit by a number of compliance failings and litigation matters in recent years. The bank said it has “wholly or partially” resolved 19 of the 20 most significant cases as measured by financial risk at the start of 2016. Litigation provisions stood at €1.2 billion at the end of last year, falling by 40 per cent from 2017.

Private and commercial bank

In the private and commercial banking division, revenues in the fourth quarter of 2018 were €2.5 billion, rising by 6 per cent year-on-year. Revenues benefited from a gain on a property sale in Sal Oppenheim of €40 million and €35 million euros from Sal Oppenheim workout activities, compared with the positive impact in the prior year quarter of €43 million euros from Sal Oppenheim workout activities. Adjusted for these effects, revenues would have been up by 5 per cent.

Revenues in the Private & Commercial Business (International) rose by 5 per cent to €349 million, while wealth management revenues were €433 million, falling by 4 per cent. Growth in the Asia-Pacific wealth business was more than offset by “significantly lower revenues in Europe, the Middle East and Africa (EMEA) including Germany”, the bank said.

At the weekend, Bloomberg ran a story, citing unnamed sources, stating that Deutsche Bank was in "advanced talks on receiving an additional investment from Qatar". The timing and size of the investment was unclear. The investment would likely come through Qatar Investment Authority, the sovereign wealth fund, the news service said. A spokesman for Deutsche Bank declined to comment. A representative for Qatar Investment Authority wasn't immediately available for comment, it said. The Qatari royal family already holds a 6.1 per cent stake in Deutsche Bank.

Nick Kalikajaros 2019