Deutsche Bank’s Profit Takes a Hit Amidst Legal Provisions
Germany’s largest lender, Deutsche Bank, has reported a weaker-than-expected profit for the fourth quarter of 2024, with net profit attributable to shareholders plummeting to 106 million euros ($110.4 million). This marks a significant drop from the 1.461 billion euros achieved in the third quarter.
Legal Provisions Weigh on Bottom Line
The bank’s revenue reached 7.224 billion euros in the fourth quarter, but was eroded by litigation costs of 594 million euros. Full-year 2024 revenue grew 4% year-on-year to 30.1 billion euros. Deutsche Bank’s CFO, James von Moltke, attributed the decline to “a very high level of non-operating costs in 2024,” including the PostBank takeover litigation matter, which represented around 900 million euros in costs.
Cost-Cutting Measures and Share Buyback
Despite the profit drop, Deutsche Bank launched a 750 million-euro share buyback and targets a cost-income ratio of below 65% this year. The bank has also embarked on a 2.5-billion-euro cost-saving drive, which has helped shares gain over 30% last year.
Challenges Ahead for European Banks
European banks, including Deutsche Bank, must now contend with the partial loss of support from high interest rates as the European Central Bank continues to loosen monetary policy. ING analysts believe that banks focusing on fee-based income and those with potential for mergers and acquisitions are better positioned for 2025.
Investment Banking Operations Shine
Deutsche Bank’s investment banking unit has seen robust performance, with revenues picking up by 30% year-on-year to 2.4 billion euros in the fourth quarter. The unit’s revenues also rose 15% year-on-year to 10.6 billion euros in 2024.
German Economy and Political Volatility
German banks are weathering the storm of a dimmed outlook for Europe’s largest economy this year, along with political volatility ahead of upcoming general elections in February. Deutsche Bank’s von Moltke expressed frustration over stagnant growth in Europe and called for a policy mix that focuses on growth and competitiveness.
Competition and Expansion
Deutsche Bank is looking to compete or benefit from uncertainty surrounding the fate of Germany’s second-largest lender Commerzbank, which could be subject to a takeover by Italy’s UniCredit. The bank is also investing to strengthen its foothold in the U.S., where operations now account for around 20% of measures including balance sheet and revenue.
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