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Deutsche Bank is resuming share buybacks after the financial hit from a long-running shareholder litigation case proved smaller than feared and as the lender reported higher than expected profits in the three months to the end of September.
“We have now sought authorisation for further share repurchases,” chief executive Christian Sewing said in a statement on Wednesday morning, when Germany’s largest lender announced the highest third-quarter pre-tax profit in its 154-year history and confirmed it was on track to meet its guidance for 2024 revenues of “around €30bn”.
But Deutsche disclosed that credit losses in 2024 would be worse than it had warned in July, when it said provisions for sour loans for the full year would be “slightly above” 30 basis points of its loan book. It warned on Wednesday that loan loss provisions would rise to €1.8bn in 2024, compared with €1.5bn last year and equivalent to almost 38bp of its current loan book.
Deutsche in July halted plans for more share buybacks after taking a €1.3bn litigation charge tied to its botched acquisition of German retail lender Postbank more than a decade ago.
That move created temporary doubts among investors over the bank’s ability to meet a long-standing promise to pay out at least €8bn through dividends and buybacks between 2022 and 2026, 41 per cent of which has been delivered so far.
But after settling the case with 60 per cent of claimants over the summer, the bank disclosed on Wednesday that it had cut the Postbank litigation charges by €440mn. Sewing stressed that the lender remained confident it could “exceed” its €8bn capital redistribution goal.
Pre-tax profits in the third quarter surged 31 per cent year on year to €2.3bn. Investment bank revenue was up 11 per cent, driven by strong fixed-income trading operations and a 24 per cent jump in origination and advisory revenues.
Deutsche’s post-tax return on average tangible shareholders’ equity in the third quarter rose 0.3 percentage points to 7.6 per cent when excluding the one-off cut to the Postbank hit, still below its medium target of more than 10 per cent.
Excluding one-offs, Deutsche’s cost to income ratio stood at 69 per cent in the third quarter, against 72 per cent last year. The lender wants to bring down that ratio to below 62.5 per cent by 2025.
The bank’s common equity tier 1 ratio — a key benchmark for its balance sheet strength — was 13.8 per cent, up from 13.5 per cent in the previous quarter and well above the lender’s target of more than 12.5 per cent.