Deutsche Bank on the road to resurrection

The German banking group is confirming the road to recovery, a path which it has been resolutely following for some time now, notably inspired by the restructuring plan steered by its discreet but determined chief executive Christian Sewing.

The four segments of what was once the sick man of European banking are posting very strong growth in pre-tax, pre-provision profits. On a consolidated basis, the figure jumps 61%, and profitability is back - at last - in double-digit territory.

Like other Wall Street heavyweights, these impressive developments are above all being driven by the investment bank's trading activities - nothing new on that front at Deutsche Bank - and to a lesser extent by the asset management segment, which also benefits from the markets' solid performance. 

Tangible book value rises 5.8% a year over the past five years - admittedly still well short of US banks' performance on that score - to reach €31 at year-end. Deutsche shares therefore trade more or less at that level, much like BNP Paribas.

Both groups remain behind their Italian or British peers such as UniCredit, Barclays or NatWest. On this subject, refer to Discount remains significant at Deutsche Bank, published last June in these same columns, and BNP still suffering from a severe stockmarket discount, published in October.

That said, the successes of the restructuring plan launched six years ago to put an end to an unbroken string of calamities since the subprime crisis should not be understated. 

In 2025, one can therefore salute the excellent control of the bank's cost base, the steady decline in provisions over the past four quarters after the flare-up when the issue of tariffs paralysed business, as well as capital ratios that are - on paper - perfectly satisfactory.

In any case, this is a genuine resurrection for Deutsche Bank, which had not traded at tangible book value for almost fifteen years. On average, its market capitalization was closer to half the value of the latter.

It is nevertheless fair to think that the bank should continue to trade at around this level, and may struggle to move materially above it in the near term. For FY 2025 that has just ended, Deutsche plans to return €2.9bn to shareholders, including €1bn in share buybacks; this, against a market capitalization that now exceeds €60bn.