Deutsche Bank Shares Rise on Better-than-Feared Q4 Profits, Dividend Hike
Global Markets

Deutsche Bank Shares Rise on Better-than-Feared Q4 Profits, Dividend Hike

Story Highlights

Deutsche Bank released its Q4 and Fiscal 2023 results that beat expectations. The lender promised to increase shareholder returns while also announcing massive job layoffs.  

Shares of German lender Deutsche Bank AG (DE:DBK) were up 5% as of writing, thanks to better-than-feared profits for the fourth quarter of 2023. Plus, the bank announced job cuts as part of its cost-cutting drive and increased shareholder returns through buybacks and dividend hikes. In Q4, profit attributable to shareholders fell 30% year-over-year to €1.26 billion but was way higher than the consensus estimate of around €786 million.

Importantly, DBK plans to increase the total shareholder returns by at least 50% in Fiscal 2024. It intends to complete share buybacks worth €675 million in the first half of this year. For 2023, DBK plans to recommend dividends of €900 million or €0.45 per share (up 50% compared to Fiscal 2022) at the upcoming Annual General Meeting in May. Meanwhile, DBK could increase its dividends to €1 per share in 2025, subject to meeting its financial targets and 50% payout ratio.

Details of DBK’s Financial Performance

In Q4, DBK’s net revenues rose 5% year-over-year while profit before tax fell 10%. This means that revenue growth could not match up with the expense growth.

For Fiscal 2023, profit attributable to shareholders declined by 16% to €4.21 billion due to higher tax expense. However, the figure exceeded analysts’ profit estimate of about €3.69 billion. Revenues rose 6% annually. Importantly, profit before tax grew 2% to €5.7 billion, reaching its highest level in 16 years.

Deutsche Bank is struggling to contain its expenses. Hence, it has announced massive job cuts of non-client-facing roles. DBK is cutting 3,500 jobs from the back-office roles. Under its €2.5 billion operational efficiency programme, the company has already achieved €900 million in savings. DBK hopes to achieve remaining cost savings of €1.6 billion from technology and infrastructure efficiencies. The programme aims to reach a cost base of €5 billion at a quarterly adjusted run rate, with FY 2025 costs falling to €20 billion.

Looking ahead, DBK increased its 2025 revenue goal to €32 billion, as it exceeded its targets in the past two fiscal years. Plus, it aims to return a total of €8 billion to shareholders over the years to boost the stock price.

What is the Price Target for Deutsche Bank?

Following the news, J.P. Morgan analyst Kian Abouhoussein reiterated a Buy rating on DBK with a price target of €14.20 (13.6% upside).

Overall, with seven Buys, four Holds, and one Sell rating on TipRanks, DBK stock has a Moderate Buy consensus rating. The Deutsche Bank AG share price forecast of €15.19 implies 21.5% upside potential from current levels.



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