Financial Results

Deutsche's Wealth, Asset Arm Reports Income Gains; Parent Suffers Loss; Management Changes

Tom Burroughes Group Editor London 29 October 2014

Deutsche's Wealth, Asset Arm Reports Income Gains; Parent Suffers Loss; Management Changes

Germany's largest bank reported income gains for its wealth and asset arm; the parent group has sustained a Q3 loss and announced a number of high-level board changes.

The asset and wealth management arm of Deutsche Bank, Germany’s largest bank, reported pre-tax income in the three months to 30 September of €288 million ($366.9 million), up from €283 million a year earlier, while the figure for the first nine months of the year was €662 million, a 14 per cent year-on-year rise.

Total net revenues in the three-month period stood at €1.267 billion, unchanged on a year ago, it said in a statement today.

Invested assets were €1.006 billion, an increase of €51 billion versus 30 June, mainly driven by foreign exchange movements, inflows and market appreciation. Net inflows of €17 billion were recorded across all products, with strong flows in both retail and institutional business.

For the banking group as a whole, it logged a net loss of €92 million in the third quarter, against net income of €51 million a year earlier; it made a pre-tax income of €266 million in Q3, up sharply from €18 million a year ago. Net income for the nine months ended 30 September was €1.250 billion, down from €2.047 billion, it said. The bank’s total cost/income ratio was 85 per cent, rising from 82 per cent a year earlier.

Explaining the net loss in Q3, Deutsche Bank said it recorded an income tax expense of €358 million versus an income tax benefit of €33 million in the comparative period. In the current quarter, the effective tax rate of 134 per cent, based on an income before income taxes of €266 million, was mainly impacted by non tax deductible litigation charges.

The Frankfurt-listed banking group has confirmed it is replacing its chief financial officer, Stefan Krause, with Marcus Schenk, head of investment banking services at Goldman Sachs’s EMEA business, initially becoming deputy CFO before taking the whole role next year.

The bank announced a number of board-level changes at a time when it continues to face some litigation and compliance issues – as is the case with many of its peers.

“We are taking this step now in order to increase our focus on the resolution of litigation matters and to further increase our organizational efficiency and effectiveness. In addition, we are beginning to see considerable opportunities arising from the digitalization of our businesses,” said Jürgen Fitschen and Anshu Jain , Deutsche’s co-chief executive officers.

Late yesterday, the bank said: “Stefan Krause, age 51, chief financial officer (CFO) since 2008, will take a new position as head of strategy and organisational development, effective November 1, which will combine responsibility for strategic development and all major change initiatives at the Bank. Mr Krause will continue as CFO until the conclusion of the annual general meeting on May 21, 2015.”

It continued: “Dr Marcus Schenck, age 48, who will join the Bank from Goldman Sachs as general manager (“Generalbevollmächtigter”) and deputy CFO, will be appointed to the Management Board, effective on conclusion of the Annual General Meeting on May 21, 2015, at which time he will succeed Mr Krause as CFO.”

Meanwhile, Henry Ritchotte will continue as chief operating officer with responsibility for technology and operations, and will in addition assume responsibility for the bank’s global digital agenda. Christian Sewing currently global head of group audit, will become a management board member and take responsibility for legal and the bank’s incident management group, effective 1 January 2015.

Stephan Leithner will focus on client opportunities in his existing role as chief executive officer for Europe (ex-Germany and UK) and will continue to head government and regulatory affairs, compliance and human resources. He will coordinate the next phase of the bank’s cultural change programmes.

The bank had a Tier 1 capital ratio of 15.5 per cent, down from 16.9 per cent a year earlier.

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