FRANKFURT—Deutsche Bank Chief Executive Christian Sewing on Thursday refused to rule out job cuts as the bank sought to cut costs. This illustrates the uncertainty facing the global financial industry as economic growth slows.
Sewing, Germany’s largest lender from New York to Sydney, said the bank was looking to cut costs and could make cuts here and there.
“I’d be lying if I said otherwise,” he said, but didn’t go into details.
The comments followed better-than-expected quarterly earnings and a third straight year of profit, but highlighted challenges ahead. Bank shares fell as much as 5% in early trading before regaining some ground.
Some analysts were disappointed by the decline in investment banking earnings in the fourth quarter and warned of risks from a slowing economy, high inflation and peak interest rates.
Analysts at JP Morgan said that “barring the risk of a potential minor rating downgrade” this year, “these results would be unlikely to change earnings expectations.”
The result marked the end of a four-year €9 billion ($9.9 billion) turnaround plan for one of the world’s most systemically important banks after years of losses.
The plan will stabilize the bank, and higher interest rates will give lenders an extra lift, Deutsche said, which will continue to boost earnings in 2023.
Net income attributable to shareholders was €1.8 billion ($1.98 billion) for the three months to 31 December. This compares with his €145 million in the same period last year, compared with analysts’ expectations of about €951 million.
It was the company’s 10th straight quarter of profit and the longest profit in at least a decade, though an industry downturn in trading slowed earnings.
Full-year profit surged to €5.03 billion, up from €1.94 billion a year earlier, beating analyst expectations of 4.17 billion. According to Deutsche, this is his biggest annual profit since 2007, thanks to his €1.4 billion in tax benefits.
Germany’s largest bank also beats its 8% return on tangible equity target, thanks to tax benefits for reaching the milestone Sewing set for the bank when it embarked on a major transformation in 2019. reached a figure of 9.4%.
“Over the past three-and-a-half years, we have successfully transformed Deutsche Bank,” said Sewing, who was promoted to the top post to turn Germany around after a series of costly regulatory failures in 2018. says.
Still, analysts said banks were vulnerable to economic headwinds, war on the continent and longstanding regulatory issues.
At a press conference, Mr. Sowing said the bank was “somewhat optimistic.”
“Certainly the geopolitical and economic situation is complex,” he said.
Portfolio manager Andreas Tomae of Deutsche’s big investor Deca said he was disappointed with Deutsche’s high costs relative to income.
When asked about potential job cuts, Sewing said the bank was working to improve costs, adding that the bank was still investing in growth areas.
One notable example is Wall Street giant Goldman Sachs laying off staff.
At 11:00 GMT, German shares were down 1.1% to €12.12, recouping earlier losses after management said it was considering a share buyback this year.
In 2019, the bank set out to reduce its reliance on volatile investment banks and restore profitability through more stable businesses serving corporate and individual clients.
The tide has turned recently, but it didn’t turn out that way.
German investment banking revenues fell to €1.7 billion in the fourth quarter, down 12% year-on-year and below expectations of €1.9 billion.
The investment banking origination and advisory business stood out, with revenue down 71%. This reflects the slump of other banks such as Goldman Sachs and JP Morgan.
Income from fixed income and currency trading, one of the bank’s largest divisions, rose 27% to €1.5bn, still short of the €1.7bn expected by analysts.
Performance is reflected in bonuses. Investment bank bonus pools fell by just under 10% last year, Reuters reports, providing further evidence that finance is in a tougher time.
Lower investment banking income was offset by corporate and retail banking profits, which registered increases of 30% and 23%, respectively. With ultra-low interest rates lasting longer than expected, the sector has been stagnating for a long time.
($1 = 0.9087 EUR)