In a strategic move to reassure investors about its ongoing turnaround, Deutsche Bank declared on Thursday its decision to cut 3,500 jobs, initiate share buybacks, and distribute dividends. This development unfolded as Germany’s largest bank, aiming to put years of turbulence behind it and shift its focus towards more stable retail banking, reported a 30% decline in fourth-quarter profits that, nevertheless, exceeded analysts’ expectations.
Although the bank had previously disclosed plans for job cuts, this was the first time a specific number had been attached to the layoffs, representing just under 4% of its global workforce, which stands at approximately 90,000. The affected positions will predominantly be in back-office roles.
The share buyback and dividend distributions are set to amount to 1.6 billion euros ($1.7 billion) and are scheduled to occur during the first half of the year. Deutsche Bank also revised its forecast for revenue growth, leading to a 4% increase in its shares during early Frankfurt trade.
These announcements and financial results mark a significant turning point for Deutsche Bank. In 2023, the bank’s retail unit surpassed the investment bank as the primary revenue driver, overturning the latter’s dominance over the previous three years. The retail division’s success was attributed to higher interest rates and a decline in global deals.
Analysts anticipate that the retail operations will continue to outpace the investment bank in the coming years, even as central banks prepare to reduce interest rates, which have been a significant driver of banks’ profitability.
Since a major overhaul in 2019 following years of losses, Deutsche Bank has endeavored to reduce its reliance on the volatile investment bank for revenues, a task that has proven challenging.
The rise of the retail division, however, has not been without challenges. A problematic integration of its Postbank arm drew regulatory scrutiny after customers faced difficulties accessing their accounts and reaching call centers.
While the drop in quarterly profit was notable, it was not as steep as analysts had feared. Net profit attributable to shareholders in the quarter was 1.26 billion euros, compared to 1.803 billion euros a year earlier, exceeding analyst expectations.
For the full year, profit declined to 4.21 billion euros from 5.03 billion euros, surpassing analyst expectations. This decline in quarterly profit was the largest since the bank stabilized earlier in the decade, marking the 14th consecutive quarter and the fourth consecutive year of profits.
Despite a challenging economic outlook for 2024, with potential interest rate cuts, Deutsche Bank remains optimistic. The bank raised its compounded annual growth rate target for revenues to between 5.5% and 6.5%, up from the previous range of 3.5% to 4.5%.
Deutsche Bank CEO Christian Sewing expressed “firm confidence” in meeting the 2025 targets while acknowledging the potential for “a continued bumpy economic ride.” Investment banking revenue rose 10% during the quarter, slightly below the expected 17% rise, and the corporate bank saw a 9% increase, surpassing the anticipated 5% gain. The retail division experienced a 4% decline, outperforming expectations of a 6% drop.
Revenue from fixed-income and currency trading, a substantial part of the bank’s business, increased by 1%, surpassing expectations compared to some competitors, such as Goldman Sachs.
