- Deutsche Bank has upped its guidance for full-year credit losses due to mounting pressure from CRE exposure.
- The bank’s Q2 net loss was €143M, impacted by legal provisions related to its takeover of Postbank.
- The lender expects its office credit portfolio to struggle despite signs of stabilization from the U.S. CRE sector.
- Provisions for credit losses are expected to top 30 bps of the average loan book, up from the previous guidance of 25–30 bps.
According to WSJ, Deutsche Bank (DB) expects more pressure in 2H24 due to its CRE exposure, particularly to the office sector, despite some signs of stabilization in the U.S. CRE market.
By The Numbers
The German lender increased its guidance for full-year credit losses, now expecting provisions to represent more than 30 bps of its average loan book, compared to the previously projected 25–30 bps.
In Q2, Deutsche Bank reported provisions for credit losses amounting to €476M, 19% higher than last year, and primarily driven by CRE exposure. The bank swung to a net loss of €143M for the quarter, compared to a profit of €763M in the same period last year.
This marks Deutsche Bank’s first quarterly net loss since 2020, largely due to a €1.3B hit from legal provisions related to its takeover of Postbank. In April, Deutsche Bank acknowledged it might have to pay up to €1.3B to Postbank shareholders after a German court ruled in their favor.
Market Reaction
The bank’s multiyear turnaround benefited from higher interest rates in recent quarters—but that advantage is disappearing as central banks move to cut rates.
This significantly impacted the bank’s financial results, contributing to a decline in after-tax profit to €52M from €940M a year earlier. Despite these challenges, the bank’s revenue grew by 2% to €7.59B.
DB shares dropped 7% in European morning trading following the announcement but remain up nearly 18% since the start of the year. The bank maintains it’s on track to hit its 2024 revenue guidance of €30B and quarterly adjusted costs are in line with targets.
