Deutsche Bank has announced its plans to accelerate and expand shareholder returns beyond 2025. While third-quarter revenue has increased, net profit has fallen due to rising costs and taxes. However, the German bank is confident that it will be able to free up approximately €3 billion of additional capital. This will be achieved by further reducing risk-weighted assets and anticipating a lower Basel III impact than initially estimated.
The funds that will be released are expected to enable the bank to invest in growth and fulfill its commitment to return €8 billion to shareholders for the years 2021 to 2025 by 2026. Chief Financial Officer James von Moltke clarified that the bank sees potential upside but did not confirm that the number would reach €11 billion. The details of the new capital plan are yet to be determined, and it will take some time to finalize the specifics. However, the company does anticipate buying back shares next year, surpassing its previous plan.
Deutsche Bank has already initiated a buyback program of up to €450 million in August. As of now, the bank has distributed approximately €1.57 billion to shareholders through both share repurchases and dividends over the course of 2022 and the first nine months of 2023. The bank remains on track to achieve its target of over €1 billion in returns in 2023, as well as €1.75 billion across 2022 and 2023.
While the bank expects to reach a net revenue of €29 billion for the year, it cautions that the fourth quarter’s earnings will likely be influenced by various one-off items, resulting in both positive and negative impacts.
Deutsche Bank Reports EUR1.03 Billion in Net Profit for Q3
In the third quarter, Deutsche Bank announced EUR1.03 billion in net profit, compared to EUR1.12 billion from the previous year. Despite this slight decrease, the bank’s revenue increased by 3%, reaching EUR7.13 billion.
Results Compared to Analyst Expectations
The bank’s net profit and revenue for the third quarter were slightly higher than analysts’ expectations. According to a consensus of analysts’ average views, the predicted net profit was EUR1.07 billion, and the expected revenue was EUR7.1 billion.
Factors Impacting Profit Margin
Deutsche Bank reported a 3% decline in after-tax profit, which it attributed to a higher effective tax rate of 30% compared to the prior year’s 23%. This change played a significant role in the overall profit margin decrease.
Decrease in Net Interest Income
Net interest income, a crucial profit driver for retail banks, experienced a decline of 9% from the previous year and a 7% fall from the second quarter. It amounted to EUR3.34 billion in the third quarter.
Rise in Non-interest Expenses
Non-interest expenses, including litigation and restructuring charges, increased by 4% in the third quarter, reaching EUR5.16 billion. This rise contributed to the overall operating costs of the bank during this period.
Loan Loss Provisions and Inflows
Deutsche Bank’s loan loss provisions decreased from EUR401 million to EUR245 million compared to the second quarter. The bank’s full-year guidance suggests that these provisions remain in line with expectations.
Furthermore, the bank reported EUR11 billion of inflows across its private bank and asset-management businesses, indicating positive growth in those areas.
Future Outlook
While Deutsche Bank expects its deposit revenues to stabilize in the coming quarters, it also anticipates an increase in non-interest rate revenue streams, such as commissions and fees. This shift will help partially offset the normalization of its deposit revenues.