Deutsche Bank’s Third Quarter Results Are… Well, About What You’d Expect If You’re Being Honest

It’s hard to know how to cover Deutsche Bank’s quarterly results these days.

The bank is akin to a failed state – it will continue to exist, but it will never recover.

Given that the odds of a long-term turnaround are very low by most accounts, the chances of something definitively good materializing out of thin air in any one quarter seem infinitesimal. As you can surmise from the following simple bar chart, the market didn’t find a lot to like in the Q3 numbers.

Deutsche is, of course, getting out of the equities business and aggressively cutting jobs. CFO James von Moltke said in an interview with Bloomberg TV that “we see ourselves as being on track to our full-year target” of 21.5 billion euros of expenses, excluding some items.

He also emphasized that “about 60% of the drop in revenues year-on-year is the impact of decisions that we made strategically and announced in July, specifically our equity sales and trading platform”.

That may all be true, but net income fell, as did revenue, which dropped 15% to €5.3 billion, below the €5.6 billion analysts were looking for.

Particularly disconcerting was FICC. Somehow, Deutsche Bank managed to engineer a 13% YoY drop in revenue from fixed income trading, no small feat considering how its ostensible peers performed. You’re reminded that JPMorgan and Morgan Stanley logged blockbuster FICC numbers for the period.

The FI trading department at Deutsche is undergoing a review of its own, and although it escaped the carnage when Christian Sewing took an axe to equities, reports suggest job cuts of around 10% may be in the offing.

Revenues in the core bank were €5.5 billion, down 4%. Excluding items, they were down 3%. Sewing cites “significant restructuring, headwinds in the global economy, and further pressure on interest rates during the quarter”.

Deutsche also slashed its outlook for its private banking business. Now, that unit (Deutsche’s largest) will see marginally lower revenue for the year. The previous outlook called for it to be flat. For Q3, revenue there was €2.1 billion, down 3%, or down 2% excluding specific items.

“Our focus here is maintaining stability in what we think is our stable businesses -— our private bank, corporate bank and asset management”, von Moltke said.

Overall, the net loss in Q3 was €832 million.

“I want to thank our employees for their strong performance and commitment during this period of change, and our clients for the strong vote of confidence in our new strategy”, Sewing remarked.


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