Deutsche Bank, Germany’s largest bank, will cut 3,500 jobs as part of its efficiency plan, with which it seeks to spur business and reduce 2.5 billion in costs. The announcement comes after registering a 16% drop in profit in 2023.
The bank had already announced cuts, but now it puts figures on them. The affected positions will be administrative, in positions that are not customer-facing. The savings plan has already reached 900 million and the workforce cut will help to partially meet the remaining 1.6 billion, it is noted, along with other measures such as efficiencies in the technological network or automation.
Full-year profit fell to 4.21 billion euros, compared to 5.03 billion euros in 2022. Despite exceeding analyst expectations, restructuring costs and other extraordinary expenses exceeded the increase in income. The drop in profit in the fourth quarter, of 30% to 1,260 million, is more worrying. It is the biggest decline since the German bank’s profits stabilized at the beginning of the decade after years of losses and turmoil.
The business figure reached 28,879 million euros, 6.1% more than a year before, including an increase of 22% in corporate banking, up to 7,716 million, and 5% in private banking, up to 9,575 million. For its part, the income of the investment banking business fell by 9%, to 9,160 million, while the turnover of the asset management division reached 2,383 million, 9% below.
After benefiting from rising interest rates, it now has to deal with a slowdown in trade, high inflation and investments to fix flawed controls. Fourth-quarter results illustrated that challenge. Although revenue increased around 5%, it fell short of analyst estimates due to worse performance in fixed income.
Despite the doubts, the entity increases the distribution of the dividend and buybacks by at least 50%, pointing to more improvements in the future. The dividend will amount to 0.45 euros per share, compared to 0.30 euros last year. “An area in which we also want to be more ambitious is in our promise to shareholders. We have always said that we want to reward their loyalty (…) we want dividends to grow. Our ambition is to be able to pay a dividend of one euro per share by 2025,” said Christian Sewing, CEO
Investors celebrated the plans, with shares rising close to 5% after a few hours of trading. The titles have increased 26% in the last six months, but are worth 87% less than at their peak in 2007. Between ups and downs, since Sewing took the reins in 2018 they have barely risen 7%. The manager seeks to improve that price by rewarding shareholders.
2024 looks more difficult for banks, with possible interest rate cuts eroding interest income, which has proven to be a boon for banks in recent quarters.
