Deutsche Bank Announces Job Cuts, Share Buyback, and Dividends in Turnaround Effort
In its latest move to reassure investors that its turnaround is on track, Deutsche Bank has announced plans to cut 3,500 jobs, initiate a share buyback, and pay dividends. The bank, Germany’s largest, reported a 30% drop in fourth-quarter profit, which still exceeded analyst expectations. This marks a significant turning point for Deutsche Bank as it seeks to put years of turmoil behind it and focus on its retail banking division.
The job cuts, equivalent to nearly 4% of the bank’s global workforce, will primarily affect back office roles. The share buyback and dividends will amount to 1.6 billion euros ($1.7 billion) and will be executed in the first half of the year. Following these announcements, Deutsche Bank raised its forecast for revenue growth, leading to a 4% increase in its shares during early Frankfurt trade.
Deutsche Bank’s retail unit has surpassed its investment bank as the main revenue driver, benefiting from higher interest rates and a decline in global deals. Analysts predict that the retail operations will continue to outperform the investment bank this year and next, despite anticipated interest rate cuts by central banks.
After years of losses, Deutsche Bank underwent a major overhaul in 2019 to reduce its reliance on the volatile investment bank for revenues. The integration of its Postbank arm proved challenging and drew criticism from regulators. The bank has also dismissed recent merger speculation.
Although restructuring costs and other one-off expenses outweighed revenue gains, Deutsche Bank’s quarterly profit decline was not as severe as anticipated. Net profit attributable to shareholders for the quarter was 1.26 billion euros, surpassing analyst expectations. Full-year profit fell to 4.21 billion euros but still exceeded analyst estimates.
While these figures mark the largest quarterly profit decline since the stabilization of Germany’s largest bank earlier in the decade, they also represent the 14th consecutive quarter and fourth consecutive year of profits for Deutsche Bank.
Looking ahead, 2024 may present more challenges for banks, with potential interest rate cuts that could erode interest income. Germany’s financial regulator, BaFin, has warned of a less favorable outlook for bank profits due to a property crisis and increasing bad loans. However, Deutsche Bank remains optimistic, raising its compounded annual growth rate target for revenues.
Deutsche Bank CEO Christian Sewing expressed confidence in meeting the bank’s 2025 targets but acknowledged the possibility of a “continued bumpy economic ride.” While investment banking revenue rose 10% during the quarter, it fell short of expectations. However, revenues at the corporate bank exceeded expectations, and the retail division’s decline was less severe than anticipated.
In summary, Deutsche Bank’s latest announcements and earnings report demonstrate its commitment to its turnaround strategy. Despite challenges in the banking industry, the bank remains optimistic about its future prospects.
