jfid – Deutsche Bank, Germany’s largest bank, saw a decline in profit in 2023. However, the bank managed to exceed market expectations with a solid performance amid uncertain economic conditions. The bank also plans to cut thousands of employees as part of its restructuring program.
According to the financial report released on Thursday, February 1, 2024, Deutsche Bank recorded a net profit of 4.21 billion euros in 2023, down 16% compared to the previous year. The main cause of the profit decline was the increase in the tax rate that the bank had to pay, which reached 1.49 billion euros, up 64% from 2022.
However, the bank also showed a fairly good revenue growth, which was 6%, to 28.9 billion euros. This shows that the bank was able to cope with the challenges of fierce competition, low interest rates, and geopolitical uncertainty. The bank also succeeded in increasing its core capital ratio (CET1) to 14.1%, exceeding the minimum target set by regulators.
One of the factors that supported the bank’s performance was the retail banking business, which recorded revenue of 2.34 billion euros in the third quarter of 2023, up 3% from the same period the previous year. This business benefited from the increase in interest rates, which increased the net interest margin. In Germany, the revenue of this business even increased by 16%.
Meanwhile, the investment banking business experienced a revenue decline of 4%, to 2.27 billion euros. This was caused by a decrease in activity in the bond and foreign exchange markets, which were affected by market volatility and weak demand. However, the bank remained optimistic that this business would recover in 2024.
Christian Sewing, CEO of Deutsche Bank, said that the bank’s annual results showed the strength of the bank’s strategy as a global bank that serves various segments of customers. “We achieved the highest pre-tax profit in 16 years, grew faster than we planned, and remained focused on cost discipline despite making important investments,” he said.
However, Sewing also admitted that the bank still had challenges to overcome, especially in terms of operational efficiency. The bank still had a high cost-to-income ratio, which was 72%, which means the bank spent 72 cents for every euro it generated. This figure is much higher than its competitors, such as UniCredit, which had a cost-to-income ratio of 39%.
To improve efficiency, the bank plans to cut around 800 employees in 2024, mainly in the investment banking division. This is a continuation of the restructuring program that has been carried out since Sewing took office as CEO in 2018, which has reduced the number of bank employees from 97,000 to 83,000.
The bank also plans to close around 93 branches in Germany in 2024, in response to the change in customer behavior that is increasingly shifting to digital services. The bank also strives to increase the use of technology, such as artificial intelligence, to improve service quality and reduce costs.
Deutsche Bank targets to achieve revenue of 32 billion euros in 2025, with a cost-to-income ratio of 65%. The bank also raised its dividend per share target from 0.30 euros to 0.45 euros for 2023, and 1.00 euros for 2025. The bank hopes that with these steps, the bank will be able to increase value for shareholders and customers.
