Deutsche Bank shares fell more than 8 per cent on Wednesday after the bank reported an 832 million euro ($924 million) third-quarter loss hurt by restructuring costs and weakness in fixed-income trading.
The bank had flagged in July it would make a loss this year and announced restructuring plans worth $7.4 billion including the elimination of 18,000 jobs.
Deutsche’s new leadership, with CEO Christian Sewing at the helm, has tried to revive Deutsche’s fortunes, but problems have persisted.
In April it called off nearly six weeks of merger talks with Commerzbank.
The third-quarter loss compares with a 3.15 billion euro loss in the second quarter and a 229 million euro net profit a year earlier. The bank is aiming to break even in 2020, but analysts are concerned about its ability to generate revenue.
CEO Sewing said the bank’s four core divisions made 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 in the quarter, had largely held back on providing estimates.
Their initial reaction was less than favorable.
“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 fell nearly 9 per cent late afternoon in Frankfurt and were heading for their biggest daily loss in almost three and a half years.
Revenue fell 15 per cent 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 interest rates. But 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’s profits rose 16 per cent helped by rising income from corporate and private banking clients.
FIXED INCOME FALL
Revenue at Deutsche’s cash-cow bond-trading division fell 13 per cent, highlighting continued weakness at its investment bank.
U.S. banks’ fixed income revenues rose 10 per cent in the third quarter, according to Goldman Sachs.
Citigroup said that Deutsche’s weak revenue in the quarter would be likely to result in a downgrade in analysts’ profit forecasts.
Deutsche, founded in 1870, is considered one of the global financial system’s most important banks, along with JPMorgan , Bank of America and Citigroup.
But after a string losses and scandals, Deutsche is going through one of the biggest overhauls to an investment bank since the aftermath of the financial crisis.
Out of a 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 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.