Deutsche Bank posts sharp decline in net profits

27 April, 2018, 01:00 | Author: Lynne Higgins
  • The cuts will result in job losses and include a scaling-back of its business with hedge funds

The company said the year-on-year development was primarily driven by exchange rate movements, notably the appreciation of the euro against the USA dollar, and lower revenues in the Corporate & Investment Bank.

Deutsche Bank's Management Board has agreed on strategic adjustments in its Corporate & Investment Bank.

"These cutbacks will be painful, but they are unfortunately unavoidable if we want to be sustainably profitable in the best interests of our bank, our clients and our investors", Sewing said in a statement. He didn't provide figures.

Revenue at Deutsche Bank in the first quarter of 2018 fell by 5% year on year to EUR7 billion, mainly because of reduced trading in shares, borrowing and currencies. Deutsche Bank said that the drop was less bad if adjusted for a weaker dollar and several one-off effects. The third largest holder is Vanguard Group Inc, which now holds $710.19 million worth of this stock and that ownership represents almost 2.29% of its market capitalization. Dekabank Deutsche Girozentrale who had been investing in Deutsche Bank Ag for a number of months, seems to be bullish on the $30.12B market cap company.

Additional cost-reduction measures will be implemented on top of those already planned. The bank will be undertaking a review of its Global Equities business with the expectation of reducing its platform.

"We have to act decisively and to adjust our strategy".

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Deutsche Bank is making radical changes to its underperforming investment bank and is likely to cut headcount significantly as it retrenches from the U.S. and focuses on the European market. It joined the ranks of global securities firms with the 1989 purchase of British merchant bank Morgan Grenfell and a decade later purchased Bankers Trust, a NY derivatives house. The firm has a market capitalization of $29,451.51, a P/E ratio of -24.33 and a beta of 1.44.

Paul Achleitner, now Deutsche Bank's supervisory board chairman, advised it on the purchase while at Goldman Sachs Group Inc. Their departures, tied to the CEO change, are part of the third high-level shake-up at the lender since Mr. Cryan took over as CEO less than three years ago. Deutsche Bank presently has a consensus rating of Hold and an average price target of $17.41. Deutsche Bank has a 12 month low of $13.52 and a 12 month high of $20.23.

Marcus Schenck, the former co-head of investment banking who had been a strong internal contender to replace Cryan, left amid the recent management shake-up.

Deutsche Bank said that the investment banking business would be aimed at its core European client base and on underwriting and financing areas in which it has a strong competitive position against other banks. It increased its estimate for restructuring expenses to 800 million euros this year, up from an earlier estimate of 500 million euros, Chief Financial Officer James von Moltke said.

Mr. Sewing said the "material workforce reduction" will focus on the investment bank, including cuts to technology and other back-office jobs.

"Delivery is key from here", said Guy de Blonay, a fund manager at Jupiter Asset Management.

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