Deutsche Bank shares slide 5% as third-quarter profits slump

  • Deutsche Bank has struggled since the global financial crisis of 2008 and the subsequent debt crisis in the euro zone.
  • The German lender has faced billion-dollar fines, higher competition, decreased market share in both commercial and investment banking, as well as different management reshuffles.

Deutsche Bank's latest set of earnings indicates the lender continues to struggle to boost its balance sheet.

The German bank has reported a net income of 229 million euros ($262.71 million) on Wednesday, above the 149 million euros expected in a Reuters poll of analysts. However, the performance that corresponds to the third quarter of 2018 was 65 percent below what the bank reported a year ago.

Here are some of the key highlights:

  • Net income: 229 million euros in the third quarter of 2018 vs 649 million euros in the third quarter of 2017
  • Profit before tax: 506 million euros in the third quarter vs 933 million euros in the third quarter of 2017
  • Common Equity Tier 1 capital ration: 14 percent in the third quarter vs 13.8 percent in the third quarter of 2017

Christian Sewing, chief executive officer of Deutsche Bank said in a statement on Wednesday: "With profit before tax of 506 million euros, this result is another milestone on our way to becoming a sustainably profitable bank. We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014."

A general meeting of Deutsche Bank 
Arne Dedert | picture alliance | Getty Images
A general meeting of Deutsche Bank 

Deutsche Bank has struggled since the global financial crisis of 2008 and the subsequent debt crisis in the euro zone. The German lender has faced billion-dollar fines, higher competition, decreased market share in both commercial and investment banking, as well as different management reshuffles.

Investors were closely monitoring the level of costs that the bank reports Wednesday. The management team, which was appointed last April, has promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1 percent from a year ago to 5.5 billion euros. The aim for the year is to bring adjusted costs down to 23 billion euros and 22 billion euros in 2019.

As part of the new team's restructuring plans, the number of workers is set to come down to 93,000 by the end of 2018. There's been a net reduction of 700 employees in the quarter to 94,717.

Investment vs. commercial banking

Analysts have pondered what is the direction for Germany's largest lender since the new management team took over last April. The new CEO, Christian Sewing, came from the commercial arm of Deutsche Bank, leading many to wonder whether the bank would become more commercially and domestically focused.

The investment arm of the bank reported a 13 percent drop in revenues during the third quarter of this year, compared to a year ago, to 3 billion euros.

"By the end of the quarter, management had completed the reduction of front-office headcount and balance sheet resources initiated in the second quarter. The focus now is on driving growth and returns while continuously improving infrastructure and controls," the bank said in a statement.

In commercial banking, revenues fell 3 percent in the third quarter versus a year ago, to 2.5 billion euros.

In terms of assets under management, these rose by 2 billion euros to 694 billion euros in the quarter on the back of a market and exchange rate movements.

Deutsche Bank shares dropped 5 percent by the end of Wednesday's session. Shares are down around 41 percent since the start of the year.