The bank made ‘good progress’ in reducing assets in the third quarter of 2019 as its newly founded capital release unit began to execute on de-leveraging actions.
Deutsche Bank has posted net revenues of €5.3 billion (US$5.9 billion) in the third quarter of 2019, down 15% from the prior year period. The decrease was driven, predominately, by the strategic decision to exit equities sales & trading, according to the bank.
The so-called capital release unit, which was established in the third quarter and houses assets the bank is eliminating, made ‘significant progress’ in reducing risk weighted assets and leverage exposure, despite reporting a loss before tax of €1 billion in the quarter reflecting costs and the non-recurrence of revenues from discontinued business activities.
In the third quarter, the capital release unit began to execute on de-leveraging actions by de-risking the cash equities trading business, shutting down systems and executing the transfer of a ‘substantial’ share of its flow equity derivatives portfolios.
Risk weighted assets declined by €9 billion in the quarter and by €16 billion year-to-date to €56 billion, compared to a full year target of €52 billion while leverage exposure declined by €73 billion in Q3 and by €104 billion year-to-date to €177 billion, compared to a full year target of €119 billion.
Following the signing of a preliminary agreement in July 2019, the bank signed a master transaction agreement for the transfer of its global prime finance and electronic equities platform to BNP Paribas in September 2019. Under the agreement, which remains subject to regulatory approvals of the relevant authorities, Deutsche Bank will continue to operate the platform until clients can be migrated to BNP Paribas.
Leverage exposure at the end of the third quarter included approximately €40 billion of exposure relating to the BNP Paribas transaction. Of these, approximately 50% are expected to be reduced on closing of this transaction before year-end, with the remainder expected to be transferred in future quarters.
Deutsche issued more than 25,000 structured products in the third quarter of 2019, according to SRP data. Issuance was down by 25% year-on-year and by 40% compared to the previous quarter when 42,282 products were launched by the bank, as the restructuring began to bite.
The vast majority of new products were certificates listed in Germany, but the bank was also active in Italy, Sweden, Belgium, and France during the quarter. Its best-selling product in the period was a ‘worst of’ autocallable note which was distributed in Spain and sold €39.7m during the subscription period.
Assets under management (AUM) stood at €1.24 trillion across asset management and the private bank. AUM grew by €37 billion in the quarter including net inflows of €5 billion. In the first nine months of 2019, AUM grew by €125 billion with cumulative net inflows of €23 billion.
‘Despite having launched the most comprehensive restructuring of our bank in two decades, we delivered profits in our four core businesses during the quarter and grew loans and assets under management,’ said Christian Sewing (pictured), chief executive officer, commenting on the results.
Click the link to view the full Deutsche Bank 3Q2019 results, earnings report, and financial data supplement.