Deutsche Bank’s 2024 Finale Marred by Litigation Costs and Revised Targets
Deutsche Bank, a prominent player in the global financial landscape, concluded its 2024 fiscal year with a mixed bag of results. While the bank demonstrated growth in revenue, its profitability was significantly hampered by substantial litigation charges, leading to a substantial decline in net profit for the fourth quarter and the full year. This performance, falling short of analyst expectations, underscored the continuing challenges faced by the bank in navigating legal complexities and achieving its financial targets.
The fourth quarter of 2024 saw Deutsche Bank record a net profit attributable to shareholders of €106 million, a staggering 92% decrease compared to the same period in 2023. This stark decline was primarily attributed to a €329 million charge related to a mis-selling scandal involving residential mortgages in Poland. This significant legal expense eclipsed the bank’s otherwise positive performance in revenue generation, which saw an 8% year-on-year increase to €7.2 billion. The market reacted negatively to the news, with Deutsche Bank’s share price experiencing a 4.35% drop following the earnings announcement.
The repercussions of the litigation costs extended beyond the fourth quarter, impacting the bank’s full-year performance. Despite achieving a full-year net profit of €2.7 billion, this represented a substantial 36% decline compared to 2023. The significant legal expenses forced the bank to revise its cost-income ratio target for 2025 upwards to under 65%, from the previously communicated target of under 62.5%. This adjustment reflected the ongoing challenges in managing legal and operational expenses.
Despite the setbacks, Deutsche Bank’s leadership expressed optimism about the future. CEO Christian Sewing emphasized the bank’s "strong and growing operating performance" as a reflection of the turnaround achieved in recent years. He highlighted the bank’s focus on revenue and business growth, cost discipline, and strategic investments, expressing confidence in achieving a return on tangible equity (RoTE) target of above 10% in 2025 and increasing shareholder distributions.
CFO James von Moltke acknowledged the impact of "significant non-operating costs," particularly long-standing litigation items, on the 2024 performance. However, he stressed that these issues were now largely behind the bank, paving the way for improved financial results in 2025. Von Moltke emphasized the bank’s commitment to operational efficiency and anticipated normalization of credit provisions, positioning Deutsche Bank for enhanced returns, organic capital generation, and exceeding its €8 billion capital distribution target through 2026.
To further bolster shareholder confidence and return value, Deutsche Bank announced a new share repurchase program worth €750 million and proposed a higher dividend of €0.68 per share for 2024, a significant increase from the €0.45 per share distributed in 2023. These measures aimed to demonstrate the bank’s commitment to rewarding shareholders despite the challenges encountered in 2024.
In summary, Deutsche Bank’s 2024 performance painted a picture of resilience amidst adversity. While significant litigation costs cast a shadow on profitability, the bank’s underlying operational strength, coupled with strategic initiatives and shareholder-friendly actions, offered a glimpse of optimism for the future. The bank’s leadership emphasized its commitment to delivering on its financial targets, driving growth, and enhancing shareholder value in the years to come. The ability of Deutsche Bank to navigate the complex legal landscape and effectively manage its operational expenses will be critical to realizing its ambitious goals.
