April 10, 2021

Deutsche Bank, finally in green

Deutsche Bank, finally in green


For the first time since 2014, Deutsche Bank has managed to present positive results. The results showed disparate trends, with a annual gain of 341 million euros which of course supposes a significant improvement with respect to the net loss of 735 million euros in 2017, but which highlights that the company still has a long way to go to register sustainable profits. "Our return to profitability shows that Deutsche Bank is on the right track," presumed CEO Christian Sewing, who He took office last April and has launched a restructuring that includes cutting more than 7,000 jobs.

The annual results could have been better if the fourth quarter had not been so hard. The net loss of 409 million euros between October and December was greater than the 268 million euros expected by analysts on average, and the final figure was down. Sewing was also forced to acknowledge that the restructuring a step somewhat slower than anticipated and announced a reduction of its adjusted costs to 21,800 million euros in 2019, slightly below the previously set target of 22,000 million euros. So far, non-interest expenses fell last year to 23,500 million euros (5%) and costs adjusted to 22,800 million euros (-5%), also below the target of 23,000 million euros had been settled down. The cost cut that have saved with the reduction of jobs in 2018 it will be fully tangible in 2019. Deutsche Bank, which starts the year with 6,000 fewer employees, generates 60% of its revenues with retail and commercial banking divisions, DWS asset management and investment banking.

The route for 2019 passes through the well-known points of clipping and expansion. The bank wants to grow this year in business and investment banking, in addition to increasing the volume of loans in the area of ​​retail and commercial banking by 7,000 million euros. The formula seems to work. Deutsche Bank last year won 3,000 new clients in the SME sector German and now wants to expand the business of asset management DWS to America and Asia, said Sewing, but it is still very difficult for the entity to meet all its objectives, especially in a year when the ECB policy will mark its turning point and in which a slowdown is expected in the markets in which it operates. The board of directors of the bank, in any case, is preparing for a potential merger with Commerzbank AG mid-year, as reported by Bloomberg, and the merger could become the only option for managers if there is no clear improvement in the first three months of 2019.

The issue is that the Deutsche Bank problem goes beyond the issue of results. On his reputation legal problems accumulate and doubts grow about his solvency. Before the crisis, the bank's shares were worth more than 90 euros, but now they move between 7 and 8 euros, closer to 7, and every time there are more doubts about the survival of what was the largest bank in Europe. To his legal calvary to be immersed in all financial scandals related to the crisis: manipulation of indexes and sale of toxic assets, has joined the investigation for money laundering in the US for its connection to the plot of Danske Bank. In recent weeks Qatar has come to the rescue, pledging to increase its participation, currently at 6%. It is already the second largest shareholder behind the Chinese conglomerate HNA and it is likely that the new investment will be made through the Qatar Investment Authority (QIA), the sovereign fund of the Arab country. The timing and size of the investment are not clear, but Sheikh Mohammed bin Abdulrahman Al Thani, president of the sovereign fund, said a few days ago that Deutsche Bank is among the leading German companies with which contact is maintained to invest. QIA handles 320,000 million and has important stakes in Germans such as Volkswagen or energy companies such as Rosneft, but the Berlin government would be in favor of a more home-made solution, in the form of a merger with Commerzbank.

That will be if Deutsche Bank does not manage to go back enough. Recall that in 2015 the former president John Cryan reported losses record of 6.7 billion euros. In 2016, the losses, due to a multi-million dollar fine in the US UU they were 1,400 million euros and in 2017, with the tax reform in the USA. UU., Deutsche Bank had to pay 1,400 million euros, which prevented the profits.


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