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Deutsche Bank sees €8bn in payouts as targets raised
capital distributions

Deutsche Bank sees €8bn in payouts as targets raised

2 min. 10.03.2022 From our online archive
New targets include a commitment to pay out half of the bank’s net income to investors in four years’ time
Deutsche Bank headquarters in Frankfurt am Main
Deutsche Bank headquarters in Frankfurt am Main
Photo credit: AFP

Deutsche Bank’s Christian Sewing vowed to raise profitability and flagged €8 billion in potential capital distributions as he seeks to attract shareholders following his turnaround of Germany’s largest lender.

The chief executive officer is targeting a return on equity of more than 10% by 2025, up from 8% this year, along with annual revenue growth of around 4%. The new targets unveiled on Thursday in Frankfurt also include a commitment to pay out half of the bank’s net income to investors in four years’ time.

Sewing’s strategy update comes three years after he embarked on an extensive restructuring to end a crisis of confidence in the bank’s business model. He cut thousands of jobs and quit equities trading, while a market rally fuelled a rebound in revenue. But Russia’s invasion of Ukraine has abruptly stopped the nascent recovery for Europe’s banks, by saddling them with souring loans and delaying a much-anticipated increase in interest rates. 

While the bank warned that the impact of the war can’t yet be fully assessed, the first two months of the year showed improvements in key metrics, allowing it to raise its revenue guidance for this year to between €26 billion and €27 billion.

Shares of the lender pared losses on the news, declining 2.5% at 1:54pm in Frankfurt. They had lost 4.9% earlier in the day as Ukraine and Russia failed to make progress in halting the war.

Chief Financial Officer James von Moltke said in an interview on Bloomberg TV that the bank’s traders so far have been “able to manage through” the volatility caused by the war “really successfully.” 

Credit Suisse Group earlier on Thursday said that the war has led to an increase in trading and hedging, though that’s being offset by a drop in capital market issuances and higher credit provisions.

Deutsche Bank’s net loan exposure to Russia is comparatively small at €600 million at the end of last year. At the same time, the bank has said it’s closely monitoring other risks, including the impact of a potential shutdown of its information-technology hub in the country.

Von Moltke downplayed the significance of the IT hub in Russia, saying the bank is “being very proactive about defending from potential cyber risks” while indicating that its future presence in Russia may shrink as big clients continue to pull out.

The CFO on Thursday again confirmed a goal for a return of 8% on tangible equity this year. The metric already stood at 11.8% in the first two months.

The new targets align Deutsche Bank more closely with rivals, several of which raised their profitability targets and payout pledges before the invasion turned the banking sector on its head.

©2022 Bloomberg L.P.

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