Deutsche Bank shares plunge as it drops 2025 cost target
Published on 30/01/2025
Deutsche Bank posted lacklustre earnings in the last quarter of 2024, as higher litigation costs significantly eroded profit margins.
German banking giant Deutsche Bank released its fourth quarter 2024 earnings on Thursday, reporting worse-than-expected results as the bank continues to deal with high litigation costs.
Net profit attributable to Deutsche Bank shareholders for Q4 2024 came up to €106 million, plummeting 92% from the corresponding period in 2023. This was also significantly below the €282.39m expected by an LSEG poll of analysts, as reported by CNBC.
Deutsche Bank blamed this figure on a €329m charge it had to pay because of a Polish residential mortgage market mis-selling scandal.
The bank’s share price dropped 4.35% on Thursday afternoon following the update.
Deutsche Bank also said that it now expects its cost-income ratio to be under 65% in 2025, up from a previously communicated target of under 62.5%.
High litigation costs continue to plague Deutsche Bank
Fourth quarter net revenue came up to €7.2 billion, which was an 8% increase from the same quarter in 2023. Profit before tax in Q4 2024 was €583m, a 17% fall from the corresponding quarter in 2023, following the bank having to absorb specific litigation item costs worth €594m.
Net profit attributable to Deutsche Bank shareholders for the full year 2024 was €2.7bn, which was a plunge of 36% from 2023.
Christian Sewing, the chief executive officer (CEO) of Deutsche Bank, said in the fourth quarter earnings report on the company’s website: “2024 was a vital year for Deutsche Bank. Our strong and growing operating performance reflects the turnaround achieved in recent years. We delivered another year of revenue and business growth, maintained tight operating cost discipline, acted decisively to put significant legacy costs behind us and continued to invest in our platform.
“All of this – together with the strong start we have made this year – gives us firm confidence that we will deliver on our RoTE target of above 10% in 2025 and further increase distributions to shareholders. In addition, we are already working on measures to further increase returns in the coming years.”
James von Moltke, the chief financial officer (CFO) of Deutsche Bank, also said in the earnings report: “Our performance in 2024 was impacted by significant non operating costs, particularly long standing litigation items, and actions we took to accelerate the execution of our strategy.
“Having put these behind us, we look ahead to 2025 having decisively reduced our risk profile and with confidence that our operating strength will be clearly reflected in our financial results.
“We remain absolutely focused on achieving the full benefits of our operational efficiency program and expect credit provisions to normalize. This positions us to grow returns, boost organic capital generation and exceed our € 8 billion goal for capital distributions through 2026.”
Deutsche Bank also announced a new share repurchase programme, worth €750m. It also proposed a higher 2024 dividend of €0.68 per share, up from 2023’s €0.45 per share.