Deutsche Bank will resume its share buyback strategy following a reduced financial blow from a longstanding shareholder litigation lawsuit and as the bank saw a surge in profits surpassing forecasts for the quarter ending in September. The bank’s CEO, Christian Sewing, expressed on Wednesday that they had sought approval for additional share buybacks. This was announced when the top bank in Germany reported a record third quarter pretax profit in its history of 154 years and said that it was on course to achieve its 2024 revenue target of approximately €30 billion.
The Dublin branch of Deutsche Bank comprises nearly 200 employees. Yet, in contrast to a warning given in July, it has revealed that 2024’s credit losses would deteriorate, claiming that provisions for bad loans for the year would slightly exceed 30 basis points of its loan portfolio. The bank further cautioned that loan loss provisions would escalate to €1.8 billion in 2024, a rise compared to €1.5 billion the preceding year and almost 38bp of its present loan portfolio.
With a €1.3 billion litigation charge linked to their flawed purchase of the German retail lender, Postbank, more than ten years ago, Deutsche Bank suspended its plans for extra share buybacks in July. This decision led to an interim scepticism amongst investors about the bank’s proficiency to fulfil its longstanding commitment to disburse at least €8 billion via dividends and buybacks from 2022 to 2026, of which 41% has already been fulfilled.
However, after resolving the lawsuit with 60% of the claimants during the summer, they disclosed on Wednesday that they reduced the Postbank litigation charges by €440 million. Mr. Sewing emphasised that the bank remains confident about surpassing its capital redistribution goal of €8 billion.
Before taxes, profits in the third quarter spiked by 31% year on year, achieving a total of €2.3 billion. An increase of 11% was noted in the revenue of the investment bank, primarily due to powerful operations in fixed-income trading, along with a remarkable 24% increase in origination and advisory revenues.
The post-tax return on the average tangible shareholders’ equity for Deutsche in the third quarter saw an increase of 0.3 percentage points, resulting in 7.6 per cent, when the singular decrease to Postbank is excluded. However, this is still below its median target of over 10 per cent.
On omitting singular occurrences, the cost to income ratio of Deutsche was positioned at 69 per cent in the third quarter, which contrasts the 72 per cent held last year. The financial institution is aiming to decrement this ratio to under 62.5 per cent by the year 2025.
The bank also noted their common equity tier 1 ratio – an important measure for the strength of its balance sheet – which stood at 13.8 per cent. This is a rise from the previous quarter’s 13.5 per cent, and comfortably surpasses the bank’s objective of more than 12.5 per cent. This information is protected by copyright under The Financial Times.