Source: Sharecast
The German lender also abandoned its 2025 cost target, revising its cost-to-income ratio goal to below 65%, compared with its previous target of under 62.5%.
Despite the disappointing results, Deutsche still announced a €750m share buyback.
Fourth-quarter net profit attributable to shareholders fell to €106m from €1.26bn a year earlier, missing analyst expectations of around €380m.
Full-year profit dropped 36% to €2.7bn, falling short of forecasts of near €3bn.
Litigation costs in the fourth quarter totaled €594m, including more than €300m in provisions for foreign currency loans in Poland and €260m related to a lawsuit in Russia.
Additionally, restructuring and severance costs neared €300m.
Investment banking continued to be a bright spot, with revenue rising 30% year-on-year in the fourth quarter, exceeding expectations.
Fixed-income and currency trading revenue grew 26%, while origination and advisory fees surged 71%, reflecting Deutsche’s expansion in merger and acquisition advisory after hiring 115 investment bankers, including 30 managing directors.
For the full year, investment banking revenue rose 15% to €10.6bn, driven by a rebound in capital markets activity.
However, pressure from rising costs weighed on overall earnings.
Deutsche’s success in investment banking led to higher compensation expenses, adding to cost pressures.
The lender had been cutting costs elsewhere, reducing 3,500 employees in non-client facing roles and 1,800 contractors as part of a €2.5bn cost-cutting drive over two years.
Deutsche’s retail and corporate banking divisions meanwhile underperformed, with the retail segment, which includes Postbank, seeing revenue decline 1%, while corporate banking revenue slipped 2%.
Meanwhile, credit provisions fell 14% year-on-year to €420m in the fourth quarter.
The bank’s CET1 capital ratio remained stable at 13.8%.
Macroeconomic uncertainty also clouded Deutsche’s outlook, with the German economy stagnating, raising concerns about loan defaults.
Political uncertainty ahead of snap national elections in February was adding another layer of risk.
Meanwhile, European banks were facing pressure from an expected shift in monetary policy, as the European Central Bank moved toward lower interest rates, potentially squeezing net interest income.
At 1146 CET (1046 GMT), shares in Deutsche Bank were down 2.6% in Frankfurt at €18.80.
Reporting by Josh White for Sharecast.com.
