Deutsche Bank details 3 500 job cuts as sewing lifts payouts

Deutsche Bank AG plans to cut 3 500 jobs over the coming years as Chief Executive Officer Christian Sewing seeks to make good on a pledge to lift profitability and return more money to shareholders.

The reductions, most of them back-office roles, are part of cost savings that the Frankfurt-based bank had previously announced. The lender detailed the cuts on Thursday as it raised its mid-term revenue target and said it will return €1.6 billion to investors in the first half of this year, including through a €675 million share buyback.

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Sewing is stepping up efforts to lift a share price that has largely treaded water since he took over, as he seeks to play a more active role in banking consolidation in Europe. After benefiting from rising interest rates over the past year, he now has to contend with a slowdown in trading, high inflation and investments to fix flawed controls.

The bank’s fourth-quarter results illustrated that challenge. While revenue rose about 5% from a year earlier, it fell short of analysts’ estimates because of a weaker-than-expected performance at the giant fixed-income desk, where trading income rose about 1%. The German lender still beat the average drop of 9.7% across Wall Street.

Deutsche Bank rose 1.1% at 9:10 a.m in Frankfurt trading. The stock has gained about 7% since Sewing was named CEO in 2018, though it’s more than doubled from the lows reached almost four years ago.

In m euros 4Q 2022 actual 4Q 2023 est. 4Q 2023 actual Y/Y change
Revenue 6,315 6,790 6,658 5%
– Investment Bank 1,675 1,991 1,837 10%
– Corporate Bank 1,760 1,874 1,911 9%
– Private Bank 2,506 2,342 2,395 -4%
Costs 5,189 5,695 5,472 5%
Credit provisions 351 395 488 39%
Pretax profit 775 864 698 -10%

Deutsche Bank’s improved outlook contrasts with French rival BNP Paribas SA, which lowered performance targets for 2025 citing factors including the European Central Bank’s end to payments on reserves, and booked a slump in fourth-quarter profit driven partly by legal provisions.

At Deutsche Bank, fees from advising on stock and bond sales as well as takeovers rose 56% in the fourth quarter. The German lender has been betting on a rebound in dealmaking with its takeover of Numis Corp. last year, the first major acquisition under Sewing.

The lender said it now targets revenue of €32 billion by 2025, after exceeding its own expectations over the past two years. With net interest income expected to decline this year as central banks mull cutting rates, much of the increased revenue ambition rests on that business, along with the trading unit.

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In trading, “momentum has carried through into 2024, so we’ve had a strong January,” Chief Financial Officer James von Moltke said in an interview with Bloomberg TV. “And we also think that the environment now, finally after two years of going backwards, should be much more conducive to corporate finance activities — financings, equity deals, M&A deals.”

Costs came in lower than analysts had expected, after Deutsche Bank over the past years realized about €900 million in cost reductions, part of a €2.5 billion program. The lender previously indicated that it planned to cut jobs to help save the remaining €1.6 billion, though it hadn’t given an exact number until Thursday.

It reiterated that it plans to exceed a pledge to return €8 billion to shareholders over several years. The distribution promise is part of Sewing’s effort to lift the stock, after restoring revenue growth and profitability in a radical revamp of the lender.

© 2024 Bloomberg

Harry Byrne

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