Deutsche Bank stock slides on further losses from U.S. commercial real estate

By Steve Goldstein

Deutsche Bank says it expects to take more provisions on loans than it did previously

Deutsche Bank shares tumbled on Wednesday as the German lender revealed further pain from U.S. commercial real-estate losses and took a provision on a long-running legal dispute.

Deutsche Bank said it lost EUR143 million ($155 million), or 28 eurocents a share in the second quarter, after a EUR1.3 billion provision for litigation on the takeover of Postbank, that it had flagged in April. That is its first loss since 2020, and Deutsche Bank executives said the size of the provision means the bank won't conduct any "top-up" stock buybacks the rest of the year.

Revenue rose 2% to EUR7.59 billion, while provisions for credit losses rose 19% and non-interest expenses climbed by 20%.

Analysts polled by Visible Alpha expected a 12 cent loss on revenue of EUR7.47 billion.

It said provisions for credit losses remain elevated due to its exposure to commercial real estate. It now says provisions for credit losses will be slightly above 30 basis points of average loans for the year, versus its previous guidance of 25 to 30 basis points.

Deutsche Bank shares (XE:DBK) (DB) slumped 6%, though the stock is up 19% this year.

Andrew Coombs, an analyst at Citi, said management was probed by analysts about capital-return trajectory and the outlook for U.S. CRE impairments. "We felt these were well addressed by management, but the results are likely to mean the stock now drifts near-term, especially given a lack of obvious catalysts and weak German PMI data out today," he said.

Deutsche Bank has EUR31 billion worth of what it calls higher-risk commercial real estate loans, 60% of which are in the U.S.

Since 2022, it's recorded EUR615 million of credit loss provisions in the U.S., including EUR130 million in the second quarter, mostly on offices whose loans were either restructured or went into default in the last 24 months.

It stuck to its 2024 revenue guidance of "around" EUR30 billion, after recording EUR15.4 billion worth of revenue in the first half.

-Steve Goldstein

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07-24-24 0859ET

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