Deutsche Bank shares surge as financier expects geopolitical volatility to boost advisory arm

By Louis Goss

Shares in Deutsche Bank surged on Wednesday as the German financier said it plans to profit on increased volatility in global markets, and boost shareholder returns using an extra EUR3 billion ($3.173 billion) worth of capital it expects to free up by 2025.

Speaking to investors, Deutsche Bank (DB) (XE:DBK) CFO James von Moltke said the current "geopolitical" and "economic" environment will likely increase their advisory business, as corporate clients turn to the bank for advice.

"The advice that is asked by the clients, on the private banking side, on the corporate banking side... is increasing and increasing," von Moltke said.

The company CFO in turn pointed to a 40% uptick in incremental deals won by its corporate division in the first nine months of 2023, as he outlined plans to capitalize on current "momentum" around booming demand for advice.

Shares in Germany's biggest lender increased 6% on Wednesday, having gained 10% over the previous 12 months.

The Frankfurt financier's third-quarter results roughly met analysts expectations, with revenues of EUR7.1 billion, marking a 2.9% increase on the third-quarter of 2022.

The bank's revenues were buoyed by a 21% uptick in revenues from its corporate banking division, to EUR1.9 billion, and a 3% uptick in income from its private banking division, to EUR2.3 billion, as it benefited from higher interest rates and an increase in new corporate and retail clients.

The higher revenues from two of its four pillars, in turn, offset falling revenues from investment banking (-4%) and asset management (-10%) arms, which were lower compared to a bumped third-quarter in 2022.

The situation saw the Frankfurt-headquartered company's pre-tax profits increase 7% to EUR1.7 billion, marking its highest third-quarter pre-tax profit in 17 years. Post-tax profits, however, fell by 3% to EUR1.2 billion, a drop Deutsche Bank blamed on a higher tax rate.

Looking forward, the bank said it expects to free up EUR3 billion worth of extra capital by 2025, due to staff cuts and a lesser-than-expected impact from Basel III regulations that govern the sums international lenders must hold in the form of capital reserves.

That reduced regulatory impact means it will be holding just EUR10-15 billion in reserves, compared to the EUR25-30 billion it previously forecast. The bank also closed 93 branches in the first nine months of 2023, as it outlined plans for further streamlining.

Deutsche Bank CEO Christian Sewing said a "significant proportion" of the EUR3 billion extra capital would be returned to the financier's shareholders.

Company CFO James von Moltke, however, said the firm has not yet decided what proportion of that freed-up capital will be returned. "We obviously owe you an answer on that," he said, adding that a portion of the capital could also be reinvested in the business.

Deutsche Bank also said it is on track to return sums worth EUR1.75 billion to shareholders, in the form of share buybacks and dividends over 2022-23, as it signaled plans to launch another share buyback scheme in 2024.

-Louis Goss

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10-25-23 0803ET

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