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January 31, 2020

Restructuring costs drives loss at Deutsche Bank

Transformation and severance costs hit Deutsche Bank in 2019, affecting its performance both at a group level and at its private bank.

The embattled bank, which is facing rough times and legal issues, has recently announced a restructuring to boost profit margins.

However, around 18,000 jobs were cut in the process. The banking group also sharpened its focus on wealth management.

Private Bank

The Private Bank registered a loss of €283m ($312m) in Q4 2019, compared to a profit of €11m in the previous year.

Total net revenues at Private Bank dropped 4% to €1.98bn in Q4 2019 from €2.08bn last year. Wealth management revenues dipped 3% year-on-year to €419m.

Asset Management

Total net revenues in Asset Management were €671m in Q4 2019, a 31% surge from €514m in the same quarter a year ago. Profit before tax increased to €177m from €59m over the period.

Group highlights

Deutsche Bank reported a net loss of €5.26bn in 2019 due to costs related to its massive overhaul.

The turnaround programmes led to a loss before tax of €2.63bn in 2019. The performance was hit by transformation charges of €1.1bn, €1bn in goodwill impairments and €805m in severance costs.

For Q4 2019, the bank’s pre-tax loss was €1.29bn.

Noninterest expenses of €25.07bn euros in 2019 were 7% higher than the previous year. Noninterest expenses were €6.39bn in Q4 2019, up 13% from €5.64bn in the prior year.

However, the bank’s CET1 capital ratio improved to 13.6% in Q4 2019, thereby meeting the target of more than 13% for 2019.

Group headcount decreased by over 4,100 in 2019.

Deutsche Bank CEO Christian Sewing said: “Our new strategy is gaining traction. Stabilising revenues in the second half of 2019 and our consistent cost discipline both contributed to better operating performance than in 2018.

“Our client business is developing well, right across the bank. With our strong capital position and a Common Equity Tier 1 capital ratio of 13.6%, we’re very confident we can finance our transformation with our own resources and return to growth. “

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