Deutsche Bank (DB, Financial) announced an increase in its loan loss provisions, marking the second adjustment this year. Despite a 42% rise in third-quarter profits, driven by growth in investment banking and asset management, the bank faced pressure from declining primary loan business income and doubled provisions compared to last year.
The bank now anticipates annual credit loss provisions of approximately €1.8 billion, equating to around 38 basis points of total loans. This is an upward revision from earlier guidance set at just over 30 basis points. Analysts from JPMorgan noted that the challenging economic climate in Germany has begun impacting Deutsche Bank's earnings, as reflected in the heightened provisions and revised guidance.
CEO Christian Sewing stated that the surge in bad loans is temporary, with commercial real estate provisions already decreasing. He committed to boosting profitability, aiming to return over €8 billion to shareholders in the mid-term, while enhancing its intermediary business as high-interest rates diminish.
Deutsche Bank's stock in Frankfurt dropped by up to 4.9%, narrowing its year-to-date gain to 26%. The decline in interest rates has weighed on the bank’s corporate and consumer loan income. However, investment banking and asset management both reported an 11% increase in revenues, with Deutsche Bank outperforming peers like JPMorgan and Goldman Sachs in fixed-income trading.
Alongside the increased loan loss provisions, Deutsche Bank released around €440 million in litigation reserves this quarter.
