Deutsche Bank, Germany’s leading financial institution, recently reported a disappointing profit margin for the final quarter of 2024, with legal expenses significantly detracting from the bottom line. In the wake of this announcement, the bank’s Frankfurt-listed shares dropped by 4.95% as of 08:24 a.m. London time.
The net profit attributed to shareholders for Q4 was just 106 million euros ($110.4 million), notably less than the 282.39 million euros projected by an LSEG poll of analysts. This was a significant decrease compared to the 1.461 billion euros posted in Q3. The full-year net profit for shareholders was 2.698 billion euros, a 36% drop from 2023.
Fourth-quarter revenue was 7.224 million euros, slightly above the LSEG analyst poll prediction of 7.125 billion euros. However, litigation costs of 594 million euros ate into this figure. The revenue for the full year of 2024 showed a 4% YoY growth, reaching 30.1 billion euros.
James von Moltke, the CFO of Deutsche Bank, acknowledged that 2024 was burdened by high non-operating costs. He revealed in an interview with CNBC’s Annette Weisbach that most of these costs were unexpected expenses or issues arising from past events, such as the PostBank takeover litigation in 2024. Despite this, von Moltke remained optimistic about the future, stating that these costs are now behind the company and that the risk profile of the bank has significantly changed.
The bank now aims for a cost-income ratio below 65% this year, up from an initial target of below 62.5%. Despite the fall in quarterly profit, Deutsche Bank has also initiated a 750 million-euro share buyback.
Other highlights from the fourth quarter include a profit before tax of 583 million euros (down 17% YoY), provision for credit losses of 420 million euros (down 14% YoY), and a CET 1 capital ratio (a measure of bank solvency) of 13.8%, unchanged from the third quarter.
Deutsche Bank’s post-tax return on tangible equity (ROTE) rate for the full year 2024 was 4.7%, a decrease from 7.4% in the previous year. This fall is significantly below the bank’s target of a ROTE rate above 10% for this year.
Despite these challenges, Deutsche Bank’s investment banking operations have shown solid performance, contributing significantly to the third-quarter revenues and playing a crucial role in the bank’s growth strategy. The unit’s revenues increased by 30% YoY to 2.4 billion euros in Q4 and by 15% YoY to 10.6 billion euros for the full year of 2024.
Deutsche Bank is also navigating the uncertain economic outlook in Europe and upcoming general elections in Germany. Nevertheless, the bank could potentially benefit from the uncertainty surrounding the future of Commerzbank, Germany’s second-largest lender, as Italy’s UniCredit has been building a stake in the company since September, fueling speculation of a possible takeover.
