Deutsche Bank, one of the most influential banks in Europe, said it is considering exiting some businesses after both fourth quarter and full 2024 year profits fell more than anticipated. The company’s investment banking arm faced limitations due to multiple new legal provisions and restructuring costs. This may come as a concern to many, especially those in Germany, as Deutsche Bank is Germany’s largest lender.
Christian Sewing, CEO of the company, has set multiple large profit and cost goals, but many analysts are skeptical that the bank could reach these large goals. Sewing believes that 2025 will be a special year for the company. In a memo to employees, Sewing said “We have always said that 2025 will be decisive for us. At the end of this year, we will be judged by whether we have been successful with our transformation and growth strategy… Nothing is off limits.” While it’s uncertain how employees at Deutsche Bank feel about the company, it’s safe to say there may be changes coming to the bank, potentially large ones
What is going to change?
In previous years, Deutsche Bank aimed for a cost-to-income ratio of anything below 62.5%. It seems that didn’t work very well for the company as they have now raised the ratio to be anything below 65%. Deutsche Bank has been struggling for the past few years, as profit decreased to 2.7 billion euros in 2024 from 4.21 in 2023. That certainly is a significant decrease, and the company missed their expected earnings of 3 billion euros last year. Those two are just part of the 5 consecutive years Deutsche Bank has been in the red.
There may be a few explanations for this. Deutsche Bank had to negotiate with the US over a large fine in 2016, was hit by the pandemic just as hard as anyone else, and also was impacted by the Ukraine war. The German economy itself has fluctuated, which may negatively impact the banks’ profits. On top of all of this, US banks have been doing phenomenally in their investment banking arms, which further raises expectations for European banks. Investors are eager to see how Deutsche Bank performs, as 2025 may be a make or break year for the company
How do you think Deutsche Bank will perform in 2025? Will they hit the mark, or will the history of being in the red continue? Let us know in the comments.
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