Wednesday 30 October 2013

Deutsche Bank report Q3 2013

Yesterday Deutsche Bank came out with their third quarter report for 2013 and it can be found here. As I expected, due to the inside trading that I reported about both here for September as well as here for August where the management and board of Deutsche Bank have been selling huge quantities of stocks, the result was very poor. I did not expect it to be as poor is it was though.

To start off let us take a closer look at what they highlighted in the report which I have taken directly from them at the link above:
  • Group income before income taxes (IBIT) of EUR 18 million included EUR 1.2 billion of litigation related charges
  • Core Bank IBIT of EUR 1.2 billion
  • Group net revenues declined 10% to EUR 7.7 billion year-on-year
  • Core Bank net revenues of EUR 7.4 billion
  • Noninterest expenses of EUR 7.2 billion increased 4% from the prior year largely due to litigation related charges
  • Net income of EUR 51 million; diluted earnings per share of EUR 0.04
  • Post-tax return on average active equity for the first nine months 2013 of 4.9% for the Group and 10.3% in the Core Bank
Excellent! 1.2 billion € in litigation costs! Good job people! Either we can keep that up and spend all the profits on employee salaries, bonuses and litigations or we can start to fire the people that are committing the crimes that leads to litigations. I vote to fire them!
We do not care about an IBIT of 1.2 billion when it is used to litigation.
The revenues declined by 10% which I have no problem with as long as they do some straight business and I would assume it comes from them increasing their core capital which means less money to use as leverage. So it is ok.

Net income for Q3 and the total 9 months, Deutsche Bank

Looking at the running nine months I would still say that Deutsche Bank has managed to do surprisingly well. They have a profit of almost 0.8 billion € less compared to 2012. I still have not seen any bigger litigation and fees on Deutsche Bank and I am astonished how little I hear and read about it in German media. I will expect much more to come and especially some more serious punishments from not only the US but also Europe and Germany to be honest I even want it to happen so that Deutsche Bank can improve and become better in the end. When taking  a closer look in the report and the running nine months then I see that they have decreased their revenue from Interest and Similar income from 25 billion € in 2012 to 20 billion € in 2013. That is a lot! They have managed to control the costs which is one reason for that the final decreased income it not worse then what it could have been. They have shrunk their assets as well as liabilities by almost 10% from 2012 so they continue to move in the direction of less leverage, which is good and a must.

Conclusion: I expected the shares to drop since I had followed the inside trading but I also expected a much bigger punch then what was in this report... that means to me that more will come. Either way I will continue to keep my Deutsche Bank shares because they can once again in the future become a great bank which... they currently are not.

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