In many ways, Christian Chewing managed to revive it. Deutsche Bank. Counterparties no longer worry about the solvency of the German banking group, and it has cut spending by 3 billion euros since taking over as CEO in 2018, according to Liam Proud at Breakingviews/Reuters. Notably, the pre-tax/gross profit of the German bank in 2022 was the highest in the last 15 years, increasing by 65% ​​to 5.6 billion euros. Its net income increased 7% year-on-year to 27.2 billion euros, while expenses before interest fell 5% to 20.4 billion euros. The dividend offered to the shareholders of the German financial institution is also generous, i.e. increased by 50% from 2021 to 30 euro cents per share. So far, the results of Christian Chewing’s recovery program are particularly encouraging.

However, as Liam Proud notes in his article, the essence of this plan was to receive an 8% return on tangible capital over the past year, which was practically unrealized. And that leaves an infamous task pending. Admittedly, Deutsche’s 12-month results suggest otherwise. Using published data, the Frankfurt-based group reported a return on equity of 9.4%, which measures the profit earned by a bank in relation to its book value. However, subtract the expense associated with the deferred tax asset and that rate drops to 6.7%, well below the 8% target. If, however, you focus on the parts of Deutsche that Cheving wants to keep for the long term, constituting the so-called core bank, then the return on equity before a one-time tax is 8.5% against the target of 9%.

In 2022, the German bank was very close to delivering a return on equity of 8%, which was a key target.

Of course, he deserves credit for being one step away from what seemed unthinkable just a few years ago, when expenses far exceeded revenues and some investors thought Deutsche needed a cash injection, as Liam Proud recalls. The main question now is whether the failure of the head of the bank in 2022 will make his ambitions for 2025 even more far-fetched. The bank expects to earn a return on tangible capital of at least 10%, which would require a valuation roughly in line with its tangible book value of 56 billion euros. Deutsche’s €24bn market capitalization is about two-fifths of that amount, suggesting that investors expect Christian Chewing to deviate from his targets. According to the average estimate of analysts, the return on equity in 2025 will be 8%.

Assuming EKT rates remain comfortably above zero, Deutsche Bank’s retail and corporate banking should be able to maintain their recent strong performance. As such, a key income variable is investment banking, which is dominated by fixed income and currency trading, which flourished in 2021 and much of 2022.