Profit falls and cost target scrapped

Germany’s largest lender Deutsche Bank on Thursday reported weaker-than-expected profit that fell sharply in the last three months of 2024, as legal provisions weighed on the bottom line.

Frankfurt-listed shares of the bank pared back some of the losses from earlier in the day to close down 1.9%.

Net profit attributable to shareholders hit 106 million euros ($110.4 million) in the fourth quarter, compared with the 282.39 million euros forecast in an LSEG poll of analysts. The result marked a significant fall from the 1.461 billion euros achieved in the third quarter.

Full-year net profit attributable to shareholders came in at 2.698 billion euros, down 36% from 2023.

Revenue reached 7.224 million euros in the fourth quarter, versus an LSEG analyst poll of 7.125 billion euros — but was eroded by litigation costs over the period to the tune of 594 million euros. Full-year 2024 revenue grew 4% year-on-year to 30.1 billion euros.

Deutsche Bank CFO James von Moltke admitted that the bank saw “a very high level of non-operating costs in 2024.”

“We are not happy with one-off expenses or surprises and most of these things have really been … issues arising from the past, sometimes the distant past, the PostBank takeover litigation matter in 2024 is a good example. Which, on a net basis, represents about 900 million of costs in ’24,” von Moltke told CNBC’s Annette Weisbach in a Thursday interview.

“So in a sense, the only good news thing you can say about it: it’s behind us. And importantly, therefore, the risk profile of the company is dramatically changed,” he added

The bank said it now targets a cost-income ratio of below 65% this year, compared with an initial goal of below 62.5%. Despite the drop in quarterly profit, Deutsche Bank also launched a 750 million-euro share buyback.

Other fourth-quarter highlights included:

• Profit before tax of 583 million euros, down 17% year-on-year;
• Provision for credit losses of 420 million euros, down 14% year-on-year;
• CET 1 capital ratio, a measure of bank solvency, was 13.8%, unchanged from the third quarter.

Deutsche Bank declared a post-tax return on tangible equity (ROTE) rate of 4.7% across full-year 2024, down from 7.4% in the previous year — and well below the lender’s target of above 10% ROTE this year.

The fourth-quarter profit drop marks a setback for the lender, which had returned to black in the third quarter, after breaking its profit streak with a 143-million-euro loss in the three months to the end of June, as it made a provision for litigation over its Postbank division. Deutsche Bank previously embarked on a 2.5-billion-euro cost-saving drive after hitting a post-financial crisis low in 2019 that crowned a decade of weak earnings, with shares progressively gaining ground to add more than 30% last year.

Previously buoyed by buybacks and a high interest rate environment, European banks must now contend with the partial loss of that support as the European…