Deutsche Bank (DB.US) returns to profit in Q3, revenue up 5% YoY, beats expectations
1min read On October 23, Deutsche Bank (DB.US) reported its financial results for the third quarter of 2024. The bank's net revenue in the third quarter was €7.501bn, up 5% YoY, topping analysts' average estimate of €7.338bn; its net profit attributable to shareholders was €1.461bn, up 42% YoY.
Notably, Deutsche Bank reported a net loss attributable to shareholders of €143mn in the second quarter, ending 15 consecutive quarters of profit, due to a slowdown in trading and the bank's accounting for costs related to legacy issues in its Postbank retail division. Deutsche Bank also said in its Q2 earnings that it would not launch its second stock buyback plan this year.
Deutsche Bank said that the release of part of its €440mn litigation provision in the third quarter helped boost profits, and the bank has already applied for a stock buyback. Deutsche Bank CEO Christian Sewing said: "We will continue on the path of profitable growth and exceed our initial target of distributing capital to shareholders."
The credit loss provision was €494mn, up 102% YoY. Non-interest expenses were €7.444bn, down 8% YoY. The CET1 capital ratio, which measures the bank's ability to pay off its obligations, was 13.8%, up from 13.5% in the previous quarter; the leverage ratio was 4.6%; the tax-adjusted tangible common equity return on tangible equity (RoTE) was 10.2%, and the cost/income ratio was 63%.
By segment: the corporate banking department (CB) had a net revenue of €1.841bn, down 3% YoY. The investment banking department (IB) had a net revenue of €2.523bn, up 11% YoY; its fixed income and currencies (FIC) business had a revenue of €2.1bn, up 11% YoY. The private banking department (PB) had a net revenue of €2.319bn, down 1% YoY. The asset management department (AM) had a net revenue of €660mn, up 11% YoY.
European banks' performances have been solidified in recent years by a series of stock buybacks and dividends. Now that the European Central Bank began to loosen monetary policy in the summer, European banks are facing pressure to achieve profit growth in a declining interest rate environment to keep pace with their US peers.
Analysts at McKinsey warned: "Looking back, while banks have reduced costs and maintained high credit quality, the improvement in returns since 2021 seems to have been mainly due to the rise in interest rates." McKinsey noted that banks need to cut costs at a rate roughly 2.5 times faster than the decline in revenue to maintain the current tangible common equity return on tangible equity.
