Deutsche Bank Profit Surges, Sees Growth Ahead; Stock Down

German banking major Deutsche Bank AG reported Thursday a significantly higher profit in its fourth quarter and fiscal 2022, mainly reflecting a tax benefit in the U.S, despite weakness in Investment Bank and asset management revenues. The company said it recorded its highest annual profit, both before and after tax, since 2007.

Further, the company lifted its dividend, and said it sees sustainable growth in the years ahead. Deutsche Bank also reaffirmed its financial targets and capital objectives for 2025.

However, Deutsche Bank shares were losing around 4 percent in the morning trading in Germany as well as in pre-market activity on the NYSE.

Bloomberg reported that the bank’s quarterly pretax profit and revenue missed market estimates.

James von Moltke, Chief Financial Officer, said, “We have delivered revenue growth in our core businesses and continued cost reductions. Our risk provisions are in line with guidance despite challenging conditions during the year. …. All of this demonstrates good momentum on the path towards our 2025 objectives.”

For 2022, the company intends to recommend a dividend of 0.30 euro per share, up 50 percent from 2021, to the 2023 Annual General Meeting.

For 2025, the bank aims for a post-tax RoTE of above 10 percent, compound annual revenue growth of between 3.5 percent and 4.5 percent from 2021, and a cost/income ratio of below 62.5 percent. The bank further aims for a CET1 ratio of around 13 percent in 2025, and reaffirmed its target for a payout ratio of 50 percent from 2025 onwards.

The company also plans for 8 billion euros in capital distributions to shareholders in respect of the financial years 2021 through 2025.

In the December quarter, Frankfurt-based company reported a net profit attributable to shareholders of 1.80 billion euros, significantly higher than 145 million euros last year.

The latest results reflected a positive year-end deferred tax asset valuation adjustment of 1.4 billion euros, compared to 274 million euros in the prior year, which reflected continued strong performance in the bank’s U.S. Operations.

On a pre-tax basis, profit was 775 million euros, up more than nine-fold from 82 million euros in 2021.

In the Core Bank, which excludes the Capital Release Unit, profit before tax was 971 million euros, more than double the level of the same period in 2021.

In the quarter, non-interest expenses fell 7 percent to 5.19 billion euros.

Revenues moved up 7 percent to 6.32 billion euros from 5.90 billion euros last year.

Corporate Bank net revenues were 1.8 billion euros, the highest for any quarter since the creation of the Corporate Bank in 2019, and up 30 percent from last year.

Investment Bank net revenues, meanwhile, fell 12 percent from last year to 1.7 billion euros mainly hit by a 71 percent year-on-year decline in Origination & Advisory revenues.

Private Bank net revenues went up 23 percent, while asset management net revenues dropped 23 percent.

In fiscal 2022, net profit more than doubled year on year to 5.7 billion euros, highest since 2007, and net revenues grew 7 percent to 27.2 billion euros.

Assets under management were 821 billion euros at year-end 2022, down 11 percent from the end of the prior year, predominantly driven by market depreciation.

The company noted that its Capital Release Unit will cease to be reported as a separate segment with effect from the first quarter.

In Germany, Deutsche Bank shares were trading at 11.76 euros, down 4.03 percent. In pre-market activity on the NYSE, the shares were trading at $12.92, down 4.23 percent.

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