Deutsche Bank posts net loss of 5.3 billion euros for 2019 amid major restructuring

Finance news

Deutsche Bank on Thursday posted a full-year net loss of 5.3 billion euros ($5.8 billion) amid a huge transformation project, the cost of which the German lender said is now 70% complete.

Analysts had expected a 5.1 billion euro loss for the year, according to a Reuters poll, while the fourth-quarter net loss came in at 1.5 billion euros against expectations of 1 billion euros.

The German lender announced in July that it would pull out of its global equities sales and trading operations, scale back its investment banking division and cut 18,000 jobs in a bid to trim its adjusted cost base by 20% by 2022.

The bank’s common equity tier 1 (CET1) ratio came in at 13.6%, unchanged from the fourth quarter of 2018 and up from 13.4% in the previous quarter, with Deutsche citing “ahead-of-target risk weighted asset reduction by the Capital Release Unit.”

Deutsche Bank Chief Financial Officer James von Moltke told CNBC Thursday that the lender was pleased with the momentum seen in the fourth quarter during the early stages of restructuring.

“It was gratifying to see that momentum support our businesses and clients come back to the franchise,” he told CNBC’s Annette Weisbach.

“Our revenues in the investment bank were up 22% year-on-year excluding specific items, which demonstrates that we also participated in the generally better conditions in the fourth quarter.”

In its earnings report Thursday morning, Deutsche Bank said the full-year net loss was “entirely driven by transformation-related effects.”

CEO Christian Sewing said in a statement Thursday that the CET1 ratio, stabilizing revenues and “cost discipline” meant the bank was confident that it can finance its transition with its own resources and “return to growth.”

2016A statue is seen next to the logo of Germany’s Deutsche Bank in Frankfurt, Germany.

Kai Pfaffenbach | Reuters

The bank attributed a 2.6 billion pre-tax loss to the absorption of transformation charges of 1.1 billion euros, goodwill impairments of 1.0 billion euros and restructuring and severance expenses of 805 million euros. The full-year loss additionally included transformation-related deferred tax asset valuation adjustments of 2.8 billion euros.

Fixed income and currency (FIC) sales and trading revenues made a tentative comeback in the fourth quarter, posting revenues of 1.2 billion euros, up 31%.

Cost reduction

Deutsche said it had “recognized 70%” of the anticipated cumulative costs to achieve its transformation strategy between 2019 and 2022.

It also reported that it had achieved the 2019 full-year adjusted cost target of 21.5 billion euros, excluding transformation charges and the fourth-quarter expenses incurred by the transfer of the bank’s Prime Finance platform to BNP Paribas.

Group headcount was reduced by over 4,100 in 2019.