Corona shows further potential: Deutsche Bank wants to save even more

Wednesday December 09, 2020

Corona shows further potential
Deutsche Bank wants to save even more

Germany's largest bank is looking even more closely at the cost side. Due to the corona crisis, the red pencil can be used for business trips and office space – and permanently, it is said. For the current year, the group is aiming for profit before taxes.

Deutsche Bank is tightening its savings target. The institute had "identified additional savings opportunities", announced Germany's largest financial institution on the occasion of an investor's day. Therefore, the Dax group wants to reduce its costs – adjusted for expenses for the group restructuring – to 16.7 billion euros by 2022. So far, the management had aimed for a target of 17 billion euros. For the current year, management expects the interim target for adjusted costs of 19.5 billion euros to be achieved. In 2021, the costs are expected to be reduced to around 18.5 billion euros.

The management sees further savings potential in the Group's own capital release unit (CRU), which Deutsche Bank uses to relieve its balance sheet. In addition, the money house wants to take positive experiences with home office and video conferences into the time after the pandemic: The corona crisis has "made further savings potential clear – especially with regard to office space and travel," explained CEO Christian Sewing.

After a series of years of losses, Deutsche Bank has been undergoing a profound group restructuring since mid-2019. The institute has withdrawn from some business areas and investment banking has been downsized. In addition, the number of full-time positions in the group is to be reduced by around 18,000 to 74,000 worldwide by the end of 2022. Deutsche Bank's branch network in Germany will also be reduced by a good 100 locations to 400. In addition, around 50 branches are to be closed at the Postbank subsidiary in the next two years.

The board had recently signaled several times that the plan to cut 18,000 jobs was not set in stone. The overriding goal is to reduce costs, said CFO James von Moltke on the occasion of the interim balance for the third quarter at the end of October.

"We will remain disciplined in terms of costs and risk management in this third phase of our transformation," affirmed Sewing. "At the same time, however, it is now also about growth in earnings and sustainable profitability."

In the first nine months of 2020, the bank increased earnings – i.e. total revenues – in its core business areas by eight percent compared to the previous year. "This positive trend continued into the fourth quarter," said Sewing. The institute is well on its way to achieving a return on equity of eight percent in 2022 as planned. According to the latest plans, investment banking should then contribute more income than previously aimed, the corporate bank responsible for medium-sized companies, family businesses and multinational corporations a little less.

Sewing affirmed that Deutsche Bank will "in all probability close this turbulent year with a pre-tax profit". So far, the board has left it open whether Germany's largest financial institution will be in the black below the line in 2020 as a whole.