Despite better business, Deutsche Bank earned less last year than the year before. This has consequences for the workforce.
Deutsche Bank is planning further savings worth billions after a decline in profits. The bank assumes that further cost reductions will be “accompanied by a reduction of around 3,500 jobs, especially in areas remote from customers,” said Germany’s largest financial institution in Frankfurt. According to a spokesman, the job cuts should be completed by the end of next year.
After cost reductions of 1.3 billion euros last year, the board wants to save a further 1.6 billion euros: in infrastructure and IT as well as by improving operational processes. Further measures include “streamlining the sales network in Germany and simplifying and automating internal processes”. The bank expects “that the vast majority of these measures will be reflected in the ongoing adjusted costs as early as 2025.”
Last year, the surplus attributable to the shareholders of the DAX group was a good 4.2 billion euros, 16 percent below the previous year’s level. A year earlier, the bank had benefited from a one-time tax credit.
However, in 2023, the institute achieved its highest profit before taxes in 16 years at almost 5.7 billion euros. CEO Christian Sewing therefore drew a positive conclusion from the past financial year: the bank had grown more strongly than planned. Income – i.e. total income – rose by six percent to around 28.9 billion euros. By 2025, they are expected to grow to around 32 billion, which is more than previously planned.
Like other financial institutions, Deutsche Bank benefited from rising interest rates worldwide. However, Sewing emphasized in a letter to the workforce that the bank’s success was “on a broad basis”: “Net interest income accounts for less than half of our income, a significantly lower proportion than at many other banks. And we are at the end of this “The year wouldn’t have been so good if the investment bank and asset management teams hadn’t achieved a lot in a difficult market environment.”
Shareholders should benefit
Shareholders should benefit from the overall positive development: the dividend is to be increased from 30 cents a year ago to 45 cents per share. The bank wants to return a further 675 million euros to shareholders by the end of June this year through share buybacks. The board of directors is targeting a dividend of one euro per share for the 2025 financial year.
In 2022 as a whole, a one-time tax credit worth billions in connection with US business gave the institute its highest profit in 15 years: after deducting interest payments to holders of subordinated bonds, the bottom line was just over 5.0 billion euros. For 2023, the board had targeted a further increase, at least before taxes.
Problems at the Postbank
Last year, problems at Postbank, which is part of the Deutsche Bank Group, caused a lot of trouble and additional costs running into millions. In connection with an IT change, there had been an increasing number of complaints from customers who, for example, could no longer access accounts or complained about delays in building financing. The financial regulator Bafin sent a special supervisor to the bank. Contrary to what CEO Sewing promised in the fall, not all problems could be resolved by the end of 2023.
There were also difficulties in converting the computer systems of the fund subsidiary DWS. The fund company wants to break away from its parent company in many administrative processes – as long as it can do it itself and cheaper. In the fall, DWS boss Stefan Hoops admitted that the IT project would take longer and be significantly more expensive than planned. After the project was expected to cost around 100 million euros last year, he expected further costs of this amount in 2024.
Despite billions in cash inflows, DWS’s profits fell last year: due to lower income and the renewal of IT, the surplus fell by five percent to 567 million euros compared to the previous year. CEO Hoops expects an increased inflow of customer money for 2024.