Deutsche Bank AG plans to accelerate payouts to shareholders after higher income from its corporate bank and deposit inflows offset weaker trading results in the third quarter.
Revenue in the three months through September rose about 3% from a year earlier to €7.13 billion, in line with analysts’ estimates. Deutsche Bank said that puts it on track to reach about €29 billion this year, the top end of its forecast range.
The lender also said it sees room to release an additional €3 billion in capital, after it improved its asset allocation and regulatory effects turned out to be less severe than initially expected.
“We have materially improved our capital outlook,” Chief Executive Officer Christian Sewing said in a statement. “This gives us scope to invest in growing our Global Hausbank model, further improve returns, and increase and accelerate distributions to our shareholders.”
Sewing has vowed to increase revenue while keeping costs in check, as he seeks to make good on a pledge to return €8 billion to shareholders over five years. While rising interest rates have helped offset a slowdown in trading in recent quarters, high inflation, investments to fix flawed controls, and a bumpy IT project at its retail unit are complicating the challenge.
Deutsche Bank’s former growth engine, the fixed-income trading unit, trailed its US peers in the third quarter as revenue declined 12%, compared with a 1.1% gain at the biggest Wall Street banks. The German firm still beat the 26% decline reported by Barclays Plc on Tuesday.
A more than three-fold increase in the business of advising on deals and stock and bond issuance wasn’t enough to make up for the trading weakness because that business is relatively small. Deutsche Bank earlier this month closed the acquisition of UK corporate broker Numis in a bid to grow its underwriting and deals advisory business.
Sewing is seeking to boost fee income to offset an expected slowdown in interest revenue as most central banks appear to near the end of a rapid series of rate increases that have allowed lenders to charge more for loans, while paying relatively little on deposits. Deutsche Bank has indicated that period may be ending as competition for deposits heats up, causing margins to shrink.
The corporate bank, which has made up for the slowdown in trading this year, reported 21% higher revenue, while the private bank that houses the retail operations showed an increase of about 3%.
Claudio de Sanctis, who oversees the private bank, is working on a revamp of the vast German retail operations to cut expenses and set the up for growth, Bloomberg has reported. But a flood of complaints from clients after a migration of two IT systems have forced the unit allocate more staff to the business.
