Deutsche Bank buyback announcement triggers stock growth

Deutsche Bank‘s shares experienced a significant surge of nearly 7% following the announcement that strong earnings would allow the bank to distribute more cash to shareholders over the next two years than previously anticipated.

In its third-quarter report, Germany’s largest lender revealed that it was on track to achieve annual revenue of €29 billion ($31 billion) in 2023, its highest in seven years. Additionally, it stated that it had the potential to release approximately €3 billion ($3.2 billion) in additional capital between now and 2025.

Deutsche Bank indicated that it expected to engage in more share buybacks next year, a move that typically boosts a company’s stock price. The bank reported a pretax profit of €1.7 billion ($1.8 billion) for the three months ending in September, representing a 7% increase compared to the same period in the previous year.

The bank’s net revenue for the third quarter rose by 3% year-over-year, reaching €7.1 billion ($7.5 billion), with strong growth noted in its private and corporate banking divisions.

Deutsche Bank’s CEO, Christian Sewing, emphasised the strong and sustained growth momentum in the bank’s business operations and its commitment to maintaining cost discipline. He indicated that these results provide scope for further improving returns and increasing distributions to shareholders.

However, Deutsche Bank’s investment banking division faced a 4% decline in revenues, which was in line with the trend observed at other banks as dealmaking decreased due to higher borrowing costs resulting from interest rate hikes.

This development marks a significant turnaround for Deutsche Bank, which has endured years of scandal, mass layoffs, and regulatory fines that have had an adverse impact on its reputation and stock price. While its shares have nearly doubled since hitting a record low in March 2020, they have still fallen by 67% over the past decade.

In July, the US Federal Reserve imposed a $186 million penalty on Deutsche Bank for failing to address “unsafe and unsound practices” identified several years earlier. The Fed found that the bank had made insufficient progress since 2018 in enhancing its anti-money laundering controls and addressing other deficiencies.