Deutsche profit slumps 65% amid ‘radical surgery’ calls
Deutsche Bank’s profits slumped 65 per cent in the third quarter as analysts warned that Germany’s flagship lender needed “radical surgery” to fix its long-running problems.
The lender is trying to bounce back after three consecutive years of losses and a stream of negative press including a ratings downgrade and several departures at senior level.
Chief executive Christian Sewing said yesterday that the bank was making progress, but the numbers did not impress investors. The bank’s share price dropped more than 4 per cent in early trading. “We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018 for the first
time since 2014,” Mr Sewing said.
Net profit was €229m (£202m), down from €649m a year ago but still beat the €149m expected in a poll of analysts. Revenue in the quarter was €6.2bn, down 9 per cent from €6.8bn a year ago.
Octavio Marenzi, chief executive of consultancy Opimas, said it was difficult to see anything positive in Deutsche’s latest earnings. “There was weakness right across all lines of business, and the return on equity achieved of only 1.3 per cent is pretty awful.”
He added: “It does seem that Deutsche Bank is starting to look at headcount reductions more seriously, particularly at the bank’s troubled Corporate and Investment Bank, with headcount down 3 per cent, but this kind of reduction looks homeopathic at a time when more radical surgery is needed.”
Deutsche already announced in May that it would cut more than 7,000 of its 97,000 global workforce in a bid to save money. The bank has struggled to achieve profitability and find a focus since the financial crisis.
In July, the lender, which has a significant UK presence, said it had moved almost half of its euro clearing business from London to Frankfurt because of Brexit.
Euro clearing is the system through which euro-based financial transactions are settled, and London is known as a leader in the clearing business.