Deutsche Bank (DB) Posts Q4 Loss On Low Revenues, High Costs
Zacks Investment Research | Jan 29, 2020 08:32PM ET
Marred by significant restructuring costs, Deutsche Bank (DE:DBKGn) (NYSE:DB) reported fourth-quarter 2019 net loss of €1.48 billion ($1.64 billion) compared with net loss of €409 million in the year-ago quarter. Also, the German lender incurred loss before taxes of €1.29 billion ($1.43 billion).
Fourth-quarter results were majorly affected by transformation charges of about €608 million ($673 million) and restructuring and severance expenses of €473 million ($523.8 million). Also, lower revenues and higher expenses were undermining factors. However, strong capital position and lower provisions were tailwinds.
In full-year 2019, the company reported net loss of €5.27 billion ($5.84 billion) against net income of €341 million in the previous year.
Revenues Decline, Provisions Fall
The bank generated net revenues of €5.35 billion ($5.93 billion), down 4% year over year. Lower revenues across most of the segments, exit from Equities Sales & Trading and a challenging market environment led to this downside.
Net revenues at the Corporate Bank division of €1.29 billion ($1.43 billion) declined 5% from the year-ago quarter. Lower revenues in global transaction banking along with commercial banking led to the fall.
Investment Bank segment’s net revenues totaled €1.52 billion ($1.68 billion), up 13% year over year. Higher revenues from fixed income and currency sales & trading resulted in the rise.
Private Bank reported net revenues of €1.99 billion ($2.2 billion), down 4%. The fall primarily stemmed from lower revenues from businesses within Germany and wealth management unit.
Asset Management segment generated net revenues of €671 million ($743.1 million), up 31% year over year, mainly due to higher management fees.
Corporate & Other unit reported negative net revenues of €59 million ($65.3 million) compared with negative net revenues of €8 million a year ago.
Capital Release unit reported negative net revenues of €179 million ($198.2 million) against net revenues of €294 million.
Provision for credit losses decreased 2% from the year-ago quarter to €247 million ($273.6 million).
Non-interest expenses of €6.4 billion ($7.1 billion) were up 13% from the prior-year quarter. Excluding restructuring-related charges, the bank reported adjusted costs of €5.1 billion ($5.65 billion), down 5.6%.
Deutsche Bank’s Common Equity Tier 1 capital ratio (fully loaded) came in at 13.6% as of Dec 31, 2019, stable year over year. Leverage ratio, on an adjusted fully-loaded basis, was 4.2%, up from 4.1%.
Risk-weighted assets declined €20 billion in the December quarter to €324 billion ($358.8 billion) sequentially.
Our Viewpoint
Deutsche Bank’s fourth-quarter results were largely affected by the costs related to its major overhaul. Also, persistent rise in provisions and lower revenues were key headwinds. Nevertheless, capital position remained decent.
Deutsche Bank’s restructuring efforts aimed to boost revenues and drive improvement across all the business segments look encouraging. However, it is really difficult to determine how much the bank will gain, considering the lingering headwinds. Moreover, dismal revenue performance is a concern.
Deutsche Bank Aktiengesellschaft Price and Consensus
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