Deutsche Bank reports highest third quarter profit before tax since 2006
Deutsche Bank today announced its highest third-quarter profit before tax since 2006
Profit before tax was € 1.6 billion for the third quarter of 2022, up nearly threefold compared to € 554 million in the prior year quarter, while post-tax profit was € 1.2 billion, up more than threefold from € 329 million in the third quarter of 2021, Profit growth reflected 15% year-on-year growth in net revenues together with an 8% reduction in noninterest expenses.
Post-tax return on average tangible shareholders’ equity (RoTE)¹ was 8.2%, up from 1.5% in the prior year quarter, Post-tax return on average shareholders’ equity (RoE) was 7.4% in the quarter, up from 1.4% year on year. The cost/income ratio improved to 72%, from 89% in the third quarter of 2021.
For the first nine months, profit before tax was € 4.8 billion, up 46%, and post-tax profit was up 68% to € 3.7 billion, Profit attributable to Deutsche Bank shareholders was up 80% to € 3.2 billion.
Post-tax RoTE1 was 8.1%, in line with the bank’s full-year target and up from 4.8% in the first nine months of 2021, while post-tax RoE was 7.2%, up from 4.3%, The cost/income ratio improved to 73%, down from 82% in the prior year period. Results for the first nine months of 2022 included bank levies of € 747 million, up € 198 million, or 36%, over the prior year period.
The Core Bank, which excludes the Capital Release Unit, produced third-quarter profit before tax of € 1.8 billion, up 104% year on year, driven by 14% growth in net revenues to € 6.9 billion combined with a 6% reduction in noninterest expenses to € 4.7 billion.
Adjusted costs ex-transformation charges and bank levies were up 6% to € 4.7 billion and up 2% if adjusted for FX movements. Post-tax RoTE1 was 9.9%, consistent with the Core Bank’s full year 2022 target of above 9% and up from 3.9% in the third quarter of 2021, Post-tax RoE was 8.8%, up from 3.4%. The Core Bank’s cost/income ratio was 68%, down from 83% in the prior year quarter.
The Capital Release Unit maintained its progress on portfolio reduction, Leverage exposure was further reduced from € 29 billion to € 25 billion, and risk weighted assets (RWAs) from € 25 billion to € 24 billion, during the quarter. RWAs included operational risk RWAs of € 19 billion.
The Capital Release Unit remains ahead of its year-end 2022 targets for both leverage exposure and RWA reduction. Since its creation in mid-2019, the Capital Release Unit has cut leverage exposure by € 224 billion, or 90%, while RWAs are down by € 40 billion, or 62%, and by 83% excluding operational risk RWAs.
The Capital Release Unit also delivered its 10th successive quarter of year-on-year loss reduction with a loss before tax of € 216 million, down 37% year on year.
The improvement was driven primarily by a 33% year-on-year reduction in noninterest expenses, while adjusted costs ex-transformation charges were down 37% year on year to € 154 million.
Net revenues were € 17 million negative, compared to € 36 million negative in the prior year quarter, reflecting lower impacts from de-risking, risk management and funding.
Investment Bank net revenues were € 2.4 billion, up 6% year on year. Revenues in Fixed Income & Currencies (FIC) were up 38% to € 2.2 billion, with Rates revenues more than double the prior year quarter, significant growth in Emerging Markets and Foreign Exchange, and growth in Financing.
Revenue growth in these businesses more than offset significantly lower revenues in Credit Trading. Revenues in Origination & Advisory were € 95 million, down 85% year on year; excluding mark to market losses in Leveraged Debt Capital Markets, revenues were down 63% year on year.
These losses drove a significant year on year decline in Origination revenues, while Advisory revenues declined but by less than the industry fee pool, For the first nine months, Investment Bank net revenues were up 8%, over a strong prior year period, to € 8.3 billion.
Private Bank net revenues were € 2.3 billion, up 13% year on year. Revenues were up 5% if adjusted for a reduction in forgone revenues from the ruling by the German Federal Court of Justice (BGH) in April 2021 regarding pricing changes on current accounts and higher revenues from Sal.
Oppenheim workout activities. This growth was driven by strong net interest income, FX movements and continued new business volumes.
Revenues in the Private Bank Germany were € 1.3 billion, up 8%, or essentially stable if adjusted for the reduced impact of the BGH ruling. International Private Bank revenues were € 977 million, up 22%, or 14% if adjusted for Sal.
Private Bank net new business volumes were € 12 billion in the quarter. This included net inflows into Assets Under Management of € 8 billion, including € 6 billion into investment products and € 2 billion into deposits, and net new client loans of € 4 billion. For the first nine months, Private Bank net revenues were up 7% to € 6.6 billion and net new business volumes were € 36 billion.
Asset Management net revenues rose 1% year on year to € 661 million, This development was driven by a 3% rise in management fees to € 626 million and a 39% increase in performance and transaction fees to € 38 million.
These more than offset the non-recurrence of Other revenues in the prior year quarter, due in part to lower gains from co-investments and negative movements in the fair value of guarantees.
Net inflows were € 8 billion, driven by Alternatives and Cash products. Assets under management were € 833 billion at quarter-end, down 5% versus € 880 billion in the prior year quarter but essentially flat from the second quarter, as net inflows and favorable FX movements offset lower market valuations. For the first nine months, net revenues were up 4% to € 2.0 billion.
