Deutsche Bank has embarked on a comprehensive restructuring plan, in a move to revive its failing business, according to reports from earlier this year, but recent events show that its program may not be going as expected. Deutsche Bank took a devastating financial blow which has totally derailed it from its intended market target.Surrounded by an ongoing restructuring plan, the German lender has released its third-quarter report for 2019 on Wednesday, which shows a net loss of 832 million euros (4 million). Even analyst, who had demonstrated a lack of confidence in the market performance of the bank, was left speechless when the reported loss exceeded their prediction of 778 million euro loss, based on data from Refinitiv. The year 2018 was a more favorable time for the bank as it
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Deutsche Bank has embarked on a comprehensive restructuring plan, in a move to revive its failing business, according to reports from earlier this year, but recent events show that its program may not be going as expected. Deutsche Bank took a devastating financial blow which has totally derailed it from its intended market target.
Surrounded by an ongoing restructuring plan, the German lender has released its third-quarter report for 2019 on Wednesday, which shows a net loss of 832 million euros ($924 million). Even analyst, who had demonstrated a lack of confidence in the market performance of the bank, was left speechless when the reported loss exceeded their prediction of 778 million euro loss, based on data from Refinitiv. The year 2018 was a more favorable time for the bank as it recorded a net profit of 229 million euros, but the magic touch seems to have been lost since the bank has continued to decline at the speed of light, losing a whopping 3.15 billion euros in this year’s second quarter.
Deutsche Bank’s Recent Data
A year ago, the German bank had a total net revenue of 6.2 billion euros which dropped to 5.3 billion euros in the third quarter of 2019.
The common equity 1 tier ratio was 14% a year ago, and now, it stands at 13.4% in the third quarter.
The total non-interest expenses reported by the bank a year ago stood at 5.6 billion euros but has risen to 5.8 billion euros in 2019’s third quarter.
Despite the unimpressive performance of the Deutsche Bank so far, its CFO, James von Moltke, stated that the results from the quarter “are entirely in line with our plans. We are executing, I think, well against the strategic changes we announced in the summer.”
He went on to add that the bank’s “net loss is a little better than our internal planning and our capital ratio at 13.4% stable quarter-on-quarter demonstrates what we set out.”
The genesis of the financial problems pummeling the German lender can be traced back to the global financial crisis of 2008 and the debt crisis that followed the euro area. The bank has come under attack on various fronts such as billion-dollar fines, reduced market share in both investment and commercial banking, management challenges and increased market competition, which has left the financial institution with huge damages.
The Financial Turbulence
Deutsche Bank, an active participant in investment banking, saw its portfolio in the sector fall by 5% from one year ago. Its private bank’s net revenue also declined by 3% and its asset management net revenue fell by 4% from one year ago.
The bank also named high expenses as another culprit responsible for its woes. The high expenses occurred in its private, corporate and investment banking units, in the areas of technology, controls, and internal services. It isn’t all bad news for Deutsche Bank as the bank’s assets under management surged by 9% from a year ago to record 754 billion euros in the third quarter for its asset management unit.
Deutsche Bank’s shares declined by 2% in early European trading hours. From a year ago, its stock price has fallen by about 16%.
Down But Not Out
Admitting its sorry state, the management of Deutsche Bank announced earlier this year that a restructuring plan would be put in motion to drag the bank out of the pit of financial backwardness. The bank’s CEO, Christian Sewing, stated that the lending institution would back out from its global equities business, terminate thousands of jobs and scale back investment banking. Deutsche Bank plans to end 18,000 jobs globally by 2022.
The job cut seems to be active already as the bank’s total number of employees has dropped by 5% compared to last year, leaving 89,958 employees on its payroll at the end of the 2019’s third quarter.
In other news, Deutsche Bank is currently in partnership with Bitmain, acting as its sponsor as the crypto mining manufacturer files for U.S. IPO, albeit covertly, with the SEC.