Deutsche Bank's Dealmakers Are Under Pressure
The German lender is returning capital, but investment banking is still a drag.
The March collapse in Deutsche Bank AG’s shares amid fears it would be the next victim of the US banking crisis is now a distant memory. The German lender on Wednesday said it was in such good shape it could afford to accelerate payouts to shareholders. But Deutsche Bank’s biggest businesses – including the investment bank – remain a drag on shareholder returns. Chief Executive Officer Christian Sewing still has revenue challenges and cost problems to address.
Returning cash looks affordable given Deutsche Bank’s core tier-one capital ratio — a measure of financial strength — was a healthy 14% at the end of September. Compound revenue growth since 2021 is ahead of target, while the ratio of cost to income has fallen. The bank reckons some €3 billion ($3.2 billion) of capital could be freed up by the end of 2025. Analysts at JPMorgan Chase & Co. predict a cumulative €1 billion of share buybacks in 2024 and 2025. That compares with a €21 billion market capitalization.