#earnings: Deutsche Bank swings to first full-year net profit since 2014

  • The profit number of 341 million euros ($390 million) for 2018 failed to beat market consensus, with a Reuters poll of analysts predicting a figure of 461 million euros.
  • For the fourth-quarter alone, the bank posted as loss of 409 million euros, which also failed to match estimates.
  • Net revenues came in at 25 billion euros for the year and 5.5 billion for the last quarter of 2018, which both narrowly missed estimates in a Reuters poll.

Deutsche Bank posted its first full-year net profit since 2014 on Friday, despite a weak fourth quarter, amid growing merger speculation and a series of uphill struggles.

The profit number of 341 million euros ($390 million) for 2018 failed to beat market consensus, with a Reuters poll of analysts predicting a figure of 461 million euros. For the fourth-quarter alone, the bank posted as loss of 409 million euros, which also failed to match estimates.

“Our return to profitability shows that Deutsche Bank is on the right track. Now, our priority is to take the next step. In 2019 we aim not only to save costs but also to make focused investments in growth. We aim to grow profitability substantially through the current year and beyond,” CEO Christian Sewing said in statement.

Net revenues came in at 25 billion euros for the year and 5.5 billion for the last quarter of 2018, which both narrowly missed estimates in a Reuters poll. Its common equity tier-1 ratio, which indicates a bank’s strength, dropped to 13.6 percent in 2018, versus 14 percent at the end of 2017.

The German lender has been under immense scrutiny by investors given its prolonged and ongoing troubles. It has been plagued by fines and several failed restructuring attempts. More recently, its headquarters were raided by prosecutors amid a money-laundering investigation.

‘Challenging’ fourth quarter

James von Moltke, the chief financial officer of Deutsche Bank, told CNBC’s Annette Weisbach that the last quarter was “challenging.”

“Obviously the market backdrop was very challenging, and we also went through some idiosyncratic, if you like, headlines. In light of that backdrop we are pleased with our performance,” he said.

Annual net revenues at the investment banking division fell 8 percent year-on-year, with asset management also falling 14 percent from a year ago. Deutsche Bank said that its asset management arm faced “difficult” market conditions with assets under management dropping 5 percent in the fourth quarter.

“We have been working to stabilize and grow revenues after having executed on the restructuring and reshaping of the business that we did in 2018. The fourth quarter, with the environment that we faced, didn’t turn out to be quarter for that turnaround but it is something we continue to work for, look for in 2019.”

Merger speculation

The bank’s ongoing problems and shrinking market capitalization has led to speculation about a potential merger with rival Commerzbank. On Thursday, a Bloomberg report suggested that a merger could happen as early as mid-2019 if efforts to restructure the bank fell short of targets.

Von Moltke said there was “a lot of speculation out there, but we won’t comment on mergers.”

“We are executing on the plan that we have defined, and as Christian said I think a number of times, we are wholly focused on our own business and on executing the plans we defined,” he added.

“We control our own fate.”

Sewing said last year that the bank needs to focus on becoming profitable rather than on a merger or an acquisition. The German government has reiterated its support to Deutsche Bank.

Peter Altmaier, minister for economic affairs and energy, told CNBC in Davos last week, that the bank has suffered some setbacks but it is still sound.

“Deutsche Bank … suffered some setbacks in the past, but it is basically sound and it can recover and so the question is what are the details of such strategy. And as we discussed with the CEO and the board and all the people concerned, I trust in Deutsche Bank and I will lend my political support to Deutsche Bank,” Altmaier said.


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