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Deutsche Bank (DB) Reports Q4 Loss on Higher Provisions
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Deutsche Bank AG (DB - Free Report) reported net loss of €1.9 billion ($2.05 billion) in fourth-quarter 2016 compared with the loss of €2.1 billion in the prior-year quarter. Loss before income taxes came in at €2.4billion ($2.6 billion), compared with the loss of €2.7 billion in the year-earlier quarter.
Higher provisions impacted the results. However, the reduction in non-interest expenses and high expenses were positives.
For 2016, net loss was €1.4 billion compared with the loss of €6.8 billion in the prior-year quarter.
High Revenues & Elevated Provisions Recorded; Costs Stable
For 2016, Deutsche Bank reported net revenue of €30 billion, down 10% year over year.
The bank reported net revenue of €7.1 billion ($7.7 billion) in the fourthquarter, up 6% year over year. Revenues included gain related to the sale of the bank’s stake in Hua Xia Bank Ltd. Excluding this gain, revenue descended 5% year over year.
Revenues at the Global Markets (GM) division dipped 3% from the year-ago quarter to €1.5 billion ($1.6 billion). The decrease came on the back of lower equity sales & trading revenues, partially offset by higher debt sales & trading revenues. Notably, negative news flow related to the DoJ RMBS settlement in Oct 2016 affected client balances, trading activity and funding costs.
Revenues at the Corporate &Investment Banking (CIB) division increased 2% from the prior-year quarter to €1.8 billion ($1.9billion). Strong debt origination and improvement in advisory revenues mainly led to the rise, partially mitigated by lower transaction banking revenues.
The Private, Wealth & Commercial Clients (PW&CC) segment’s revenues totaled €2.4 billion ($2.6 billion), up 27% year over year. Increased revenuesincluded the gain on sale of the Hua Xia Bank Ltd. stake.
At the PostBankunit, revenues of €824 million ($889 million) surged 34% from the year-ago figure.
Excluding the Abbey Life gross-up, the Deutsche Asset Management (Deutsche AM) segment posted revenues of €712million ($768.3million), down 4% year over year.
Non-Core Operations Unit (NCOU) recorded revenues of €142 million ($153.2 million) compared with net loss of €60 million in the prior-year quarter. The risereflected de-risking gains.
The provision for credit losses jumped 30% from the year-ago quarter to €492million ($530.9 million).
Non-interest expenses of €9 billion ($9.7 billion) were almost in line with the year-earlier quarter. Expenses included litigation charges associated with the Department of Justice (DoJ) RMBS settlement and a charge for impairment of goodwill and other intangible assets related to the sale of Abbey Life.
Deutsche Bank’s Common Equity Tier 1 (CET1) capital ratio (pro-forma Capital Requirements Regulation (CRR)/Capital Requirements Directive 4 (CRD 4) fully loaded) was 11.9% as of Dec 31, 2016, compared with11.1% as of Dec 31, 2015. Leverage ratio, on an adjusted fully-loaded basis, was 3.5% as of Dec 31, 2016, in line with theprior-year quarter. Risk-weighted assets amounted to €358billion ($386.3 billion) as of Dec 31, 2016,down 9.8% year over year.
Our Viewpoint
Cryan, who succeeded co-CEO Anshu Jain last June, inherited the task of executing the bank’s “Strategy 2020,” which comprises several measures including initiatives to reposition Investment Banking, reduce cost, reorganize retail business and trim the geographic presence. Deutsche Bank’s revenue challenges should ease to some extent as it is expediting such efforts.
However, profitability remains threatened by a stressed operating environment with negative interest rates, sluggish European economy and global headwinds.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2016 pre-tax operating profit of CHF 1.11 billion ($1.11 billion) on an adjusted basis, up 46.6% from the prior-year quarter. While results reflected increase in net trading income, they recorded a decline in net fee and commission income. Notably, the quarter benefited from the company’s consistent focus on expense management.
Among other foreign banks, Itau Unibanco Holding S.A. (ITUB - Free Report) and The Royal Bank of Scotland Group plc are scheduled to report results on Feb 7 and Feb 24, respectively.
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Deutsche Bank (DB) Reports Q4 Loss on Higher Provisions
Deutsche Bank AG (DB - Free Report) reported net loss of €1.9 billion ($2.05 billion) in fourth-quarter 2016 compared with the loss of €2.1 billion in the prior-year quarter. Loss before income taxes came in at €2.4billion ($2.6 billion), compared with the loss of €2.7 billion in the year-earlier quarter.
Higher provisions impacted the results. However, the reduction in non-interest expenses and high expenses were positives.
For 2016, net loss was €1.4 billion compared with the loss of €6.8 billion in the prior-year quarter.
High Revenues & Elevated Provisions Recorded; Costs Stable
For 2016, Deutsche Bank reported net revenue of €30 billion, down 10% year over year.
The bank reported net revenue of €7.1 billion ($7.7 billion) in the fourthquarter, up 6% year over year. Revenues included gain related to the sale of the bank’s stake in Hua Xia Bank Ltd. Excluding this gain, revenue descended 5% year over year.
Revenues at the Global Markets (GM) division dipped 3% from the year-ago quarter to €1.5 billion ($1.6 billion). The decrease came on the back of lower equity sales & trading revenues, partially offset by higher debt sales & trading revenues. Notably, negative news flow related to the DoJ RMBS settlement in Oct 2016 affected client balances, trading activity and funding costs.
Revenues at the Corporate &Investment Banking (CIB) division increased 2% from the prior-year quarter to €1.8 billion ($1.9billion). Strong debt origination and improvement in advisory revenues mainly led to the rise, partially mitigated by lower transaction banking revenues.
The Private, Wealth & Commercial Clients (PW&CC) segment’s revenues totaled €2.4 billion ($2.6 billion), up 27% year over year. Increased revenuesincluded the gain on sale of the Hua Xia Bank Ltd. stake.
At the PostBankunit, revenues of €824 million ($889 million) surged 34% from the year-ago figure.
Excluding the Abbey Life gross-up, the Deutsche Asset Management (Deutsche AM) segment posted revenues of €712million ($768.3million), down 4% year over year.
Non-Core Operations Unit (NCOU) recorded revenues of €142 million ($153.2 million) compared with net loss of €60 million in the prior-year quarter. The risereflected de-risking gains.
The provision for credit losses jumped 30% from the year-ago quarter to €492million ($530.9 million).
Non-interest expenses of €9 billion ($9.7 billion) were almost in line with the year-earlier quarter. Expenses included litigation charges associated with the Department of Justice (DoJ) RMBS settlement and a charge for impairment of goodwill and other intangible assets related to the sale of Abbey Life.
Deutsche Bank’s Common Equity Tier 1 (CET1) capital ratio (pro-forma Capital Requirements Regulation (CRR)/Capital Requirements Directive 4 (CRD 4) fully loaded) was 11.9% as of Dec 31, 2016, compared with11.1% as of Dec 31, 2015. Leverage ratio, on an adjusted fully-loaded basis, was 3.5% as of Dec 31, 2016, in line with theprior-year quarter. Risk-weighted assets amounted to €358billion ($386.3 billion) as of Dec 31, 2016,down 9.8% year over year.
Our Viewpoint
Cryan, who succeeded co-CEO Anshu Jain last June, inherited the task of executing the bank’s “Strategy 2020,” which comprises several measures including initiatives to reposition Investment Banking, reduce cost, reorganize retail business and trim the geographic presence. Deutsche Bank’s revenue challenges should ease to some extent as it is expediting such efforts.
However, profitability remains threatened by a stressed operating environment with negative interest rates, sluggish European economy and global headwinds.
Deutsche Bank AG Price
Deutsche Bank AG Price | Deutsche Bank AG Quote
Deutsche Bank currently boasts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Competitive Landscape
UBS Group AG (UBS - Free Report) reported fourth-quarter 2016 pre-tax operating profit of CHF 1.11 billion ($1.11 billion) on an adjusted basis, up 46.6% from the prior-year quarter. While results reflected increase in net trading income, they recorded a decline in net fee and commission income. Notably, the quarter benefited from the company’s consistent focus on expense management.
Among other foreign banks, Itau Unibanco Holding S.A. (ITUB - Free Report) and The Royal Bank of Scotland Group plc are scheduled to report results on Feb 7 and Feb 24, respectively.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>