Deutsche Bank posts third-quarter loss on restructuring, weakness in trading

[October 30, 2019]  FRANKFURT (Reuters) - Deutsche Bank <DBKGn.DE> posted an 832 million euro ($924 million) third-quarter loss on Wednesday hurt by restructuring costs and weakness in fixed income trading, sending shares in Germany's biggest lender down more than 7%.

The bank in July had flagged a loss this year and announced restructuring plans worth $7.4 billion including the elimination of 18,000 jobs.

The quarterly loss follows one of 3.15 billion euros in the second quarter and contrasts with a 229 million euro net profit a year earlier. The bank is aiming to break even in 2020, but analysts are concerned about the bank's ability to generate revenue.

CEO Christian Sewing noted the bank's four core divisions posted a pretax profit. "These quarterly results are just an interim assessment, but they are encouraging," Sewing wrote to staff.

Analysts, unsure of the size of restructuring costs the bank was planning to post in the quarter, had largely held back on providing estimates.

The initial reaction from some analysts was less than favorable, however.

"One has to look very hard to find anything positive in Deutsche Bank's results this quarter," said Octavio Marenzi, CEO of capital markets management consultancy Opimas.

The bank's shares were heading to their biggest daily loss in almost 18 months.

Revenue fell 15% to 5.3 billion euros, short of a 5.6 billion euros expected by analysts, according to Refinitiv Eikon data.

The bank attributed the decline to its decision to exit its equities business as well as macroeconomic uncertainty and negative rates. However, it lagged rivals facing similar headwinds.

Credit Suisse on Wednesday reported a rise in third-quarter earnings buoyed by higher revenue in markets and international wealth management. Standard Chartered posted a 16% rise in quarterly profit helped by rising income from corporate and private banking clients.

FIXED INCOME FALLRevenue at Deutsche's cash-cow bond-trading division fell 13%, underscoring continued weakness at its investment bank.

U.S. banks saw a 10% rise in the third quarter, according to Goldman Sachs.

Citigroup said that Deutsche's weak revenue in the quarter would likely result in a downgrade by analysts in their profit forecasts.
 

People walk past a Deutsche Bank office in London, Britain July 8, 2019. REUTERS/Simon Dawson/File Photo

Deutsche, founded in 1870, is considered one of the most important banks for the global financial system, along with JPMorgan Chase, Bank of America and Citigroup.

But it has faced a stream of losses and scandal, prompting it to embark on one of the biggest overhauls to an investment bank since the aftermath of the financial crisis.

Of its planned 18,000 job cuts, Deutsche eliminated 1,500 in the third quarter though the number of employees in its investment bank rose as an intake of new graduates offset staff cuts in equity trading.

The bank said that revenue at its private bank, which focuses on retail clients and Germany and is the bank's largest division, would be "slightly lower" in 2019, due to lower interest rates. That is a downgrade from earlier expectations for little change from 2018.
 

Deutsche highlighted some progress in winding down 74 billion euros of risk-weighted assets, a pillar of its restructuring plan.

Deutsche financial chief James Von Moltke said the bank had auctioned off three books of less complex equities derivatives, which was "quite successful".

The focus will now turn to more complex derivatives, which will take place slowly over coming years, he said.

JPMorgan, however, said it was concerned about revenue losses at the so-called capital release unit, which amounted to 223 million euros in the quarter and contributed to a 1 billion pretax loss at the unit.

Deutsche's woes peaked with a $7.2 billion U.S. fine in 2017 for its role in the mortgage market crisis.

Its new leadership, with Sewing at the helm, has tried to revive Deutsche's fortunes, but problems have persisted.

In April it called off nearly six weeks of talks to merge with Commerzbank <CBKG.DE>.

(Reporting by Tom Sims, Arno Schuetze, Patricia Uhlig and Hans Seidenstuecker; editing by Jason Neely and Louise Heavens)

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