Deutsche Bank announced on Thursday its strategic initiatives aimed at affirming its commitment to a successful turnaround and appealing to investors. This move involves a multifaceted approach, including a significant reduction of 3,500 jobs, share buybacks totaling 1.6 billion euros ($1.7 billion), and the distribution of dividends.
The bank's fourth-quarter financial report disclosed a 30% decrease in profit, surpassing analysts' predictions. Notably, this marks the first time the bank has quantified its job cuts, amounting to nearly 4% of its global workforce, predominantly affecting back-office roles.
The share buyback, slated for the first half of the year, is part of the bank's strategy to enhance shareholder value. Simultaneously, Deutsche Bank raised its revenue growth forecast, prompting a 4% surge in its shares during early trading in Frankfurt.
This development occurs at a pivotal juncture for Deutsche Bank, where its retail unit has surpassed the investment bank as the primary revenue generator. The retail division's ascendancy began in 2023, propelled by increased interest rates and a downturn in global deals, marking a shift from the investment bank's prior dominance.
Analysts anticipate the retail segment's continued outperformance in the coming years, even as central banks consider reducing interest rates, which have bolstered banks' profitability.
Since its extensive restructuring in 2019 following years of financial losses, Deutsche Bank has sought to diminish its reliance on the volatile investment banking sector. The troubled integration of its Postbank arm drew regulatory scrutiny, emphasizing the challenges associated with merging with another bank. Although recent merger speculations gained traction, the bank swiftly dismissed such talks.
The reported decline in quarterly profit is attributed to restructuring costs and other one-off expenses, mitigated by revenue gains. Despite the drop, net profit attributable to shareholders was 1.26 billion euros, exceeding analysts' expectations and reflecting the 14th consecutive quarter and fourth consecutive year of profits for Deutsche Bank.
These financial results set the stage for what could be a challenging 2024 for banks, with potential interest rate cuts threatening the interest income that has supported recent profitability.
Germany's financial regulator, BaFin, has warned of a less favorable environment for bank profits in 2024 due to a property crisis and increasing loan defaults.
Despite these challenges, Deutsche Bank remains optimistic, raising its compounded annual growth rate target for revenues. CEO Christian Sewing expressed confidence in meeting the 2025 targets but acknowledged the likelihood of a continued uncertain economic landscape.
Investment banking revenue rose by 10% during the quarter, albeit falling short of the expected 17% increase, while other segments, such as the corporate bank and retail division, either met or exceeded expectations.
Notably, the performance of Deutsche Bank's fixed-income and currency trading unit, a key business area, outpaced some competitors, including Goldman Sachs.
01.02.2024
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