There was some good, but mostly bad news in Deutsche Bank’s Q3 earnings report.
The good news is that after years of turmoil, the biggest German bank is showing signs of stabilization under new CEO Christian Sewing after a bitter boardroom battle. The bad news is that the bank missed across all key revenue metrics as Sewing scrambles with a looming problem: how to boost revenue after firing thousands of banks in a multi-year long cost-cutting campaign.
The German bank reported net income of €229 million on Wednesday, above the €160 million expected but 65% below the €649 million reported a year ago. Profit before tax also tumbled by nearly half, dropping from €933 million to €506 million.
Investors were closely watching the bank’s costs: the new management team, which was appointed last April, promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1% from a year ago to 5.5 billion euros, with the aim for the full year to bring adjusted costs down to €23 billion and €22 billion in 2019. A core part of the new “restructuring” effort have been mass layoffs as the number of workers is set to come down to 93,000 by the end of 2018, and 90,000 one year later.
But while costs and the bottom line beat were a modest positive surprise, the same could not be said for the bank’s revenue which disappointed across the board: total revenue of €6.17BN missed expectations of €6.34BN and guided lower, now predicting a slight decline for full year revenue after earlier guiding for a flat result; trading income in the key FICC division tumbled 15% from a year earlier, while equities trading, a sector where Wall Street banks generally posted gains, also dropped at the same pace as these two key businesses have been hardest-hit by executives departures recently.
More Q3 revenue details:
