Deutsche Bank has warned of a € 300 million success in its profits in 2021 as Germany’s largest lender digested the financial repercussions of a court ruling that overturned the past increase in current account expenses. in their home market.
The warning is the second in the last two months to lower the bank’s full-year outlook. In April, he disclosed that he would miss his 2021 cost reduction target of € 400 million due to having to pay more than expected in EU bank rescue funds. It will also pay a payment of 70 million euros to the German private bank’s deposit insurance scheme, which has suffered a blow of more than 3 billion euros since the collapse of Greensill Bank.
Prior to Thursday’s announcement, analysts expected a pre-tax profit of 2.7 billion euros in 2021, compared to 1 billion euros last year. Shares of the lender, which are up more than a third this year, fell 0.6 per cent in afternoon trading in Frankfurt.
James von Moltke, chief financial officer, said he was “increasingly optimistic” that US payments to EU bank bailout funds would decrease next year. Deutsche and other lenders are pushing in Brussels to lower these contributions.
“I don’t think there is a political consensus around making a change to that leverage,” von Moltke told Goldman Sachs at the European Financial Conference.
As a result, Deutsche may also miss its 2022 cost reduction target, which was raised by 300 million euros in December alone, in part based on the assumption that the bank tax will fall next year.
Thursday’s warning follows an April 27 decision by Germany’s highest court, which ruled that the past increase in current account expenses was illegal. The judges downplayed a ten-year practice in which banks unilaterally changed their terms and conditions and treated customers ’lack of response as an agreement.
The court case was brought by a consumer rights group against Deutsche Bank’s Postbank sales mark. The decision could nullify up to half of the German banking sector’s annual profits, the country’s banking government BaFin warned last month.
Von Moltke told analysts Thursday that Deutsche would set aside a provision of 100 million euros for potential compensation claims in the second quarter. In addition to that, the revenues of the retail division will be 200 million euros more this year, he said.
“We expect that by Q4, we will have re-established those tariff agreements [that were nullified by the court ruling]. So we see the lost revenue as temporary. ”
Despite the additional headwinds, von Moltke is optimistic about the prospects for Deutsche, which is in the midst of a three-year turnround plan. At the beginning of the year, the lender recorded its highest quarterly profit since 2014, thanks to a boom in bond trading, strong results in asset management and a clean exit from its exposure to the implosion of the Archegos Capital family office.
“We’ve reached this point where the momentum is in our favor,” he said, adding that the show will “normalize” in the second quarter. However, von Moltke emphasized that the “underlying trend” of an improving investment bank was “always present”.