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Deutsche Bank's Cryan: No strategic change, but return to profitability in 2017


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Deutsche Bank's Cryan: No strategic change, but return to profitability in 2017

Deutsche Bank AG will not significantly change its strategy in the foreseeable future, in spite of expectations it should do so, CEO John Cryan said as he announced yet another loss-making year for the struggling German lender.

"I am sure that many of you are expecting to hear something completely new about our strategy today," Cryan told journalists after the release of the lender's fourth-quarter and full-year 2016 results. "Ladies and gentlemen, there will be no fundamental change to who we are. We are a European bank with strong German roots and a global network for our clients."

Quashing widespread market speculation that Deutsche Bank would announce a strategic pivot toward lending to the German corporate sector, he added: "We know what we are good at. We must build on our strengths."

The bank posted a net loss attributable to shareholders and additional equity components of €1.40 billion for full-year 2016, down from €6.79 billion a year earlier.

A long-winded restructuring process is "starting to bear fruit," and 2017 is likely to see the bank in the black for the first time since 2014, Cryan added.

"Our expectation would be that we would be profitable this year," he said. "We have put an awful lot of our difficulties behind us. I have to stress, we are not all there yet, but we have made very good progress and we would hope that we would make a profit this year. That is our intention." However, the CEO indicated that even in the event of a profitable 2017, it is unlikely the bank will pay any dividends.

Potential Postbank sale

Meanwhile, Deutsche Bank has no immediate plans to sell Deutsche Postbank AG. The group has the clear intention to dispose of the unit but still needs to ensure it is "sufficiently attractive as a stand-alone bank," CFO Marcus Schenck said.

Schenck added that he is not concerned about Deutsche's profitability being put at risk by a possible impairment charge at Postbank in 2017 because no sale will be initiated if such a risk exists. Deutsche may face such a charge due to a conflict in accounting rules as the group has adjusted the value of Postbank under IFRS standards, which are not used in Germany, while German accounting standards are used to determine whether a bank can pay interest on its hybrid Additional Tier 1 bonds.

Postbank's net revenues stood at €824 million for the fourth quarter of 2016 compared to €615 million for the same period of the previous year. Net revenues for full-year 2016 went up to €3.36 billion from €3.11 billion in 2015. The unit's performance is expected to improve this year, according to Schenck.

Asset management business

Deutsche Bank has enough liquidity to pay out Additional Tier 1 coupons for 2017 without dipping into its reserves, Cryan said.

He was also bullish about Deutsche's common equity Tier 1 ratio of 11.9% at the end of 2016, dismissing media speculation about a potential IPO for its asset management business as a means to prop up capital reserves. The CEO highlighted the importance of Deutsche Asset Management as a core business for the group and said there is "nothing to report" regarding a rumored sale.

Cryan also apologized for the bank's past misbehavior, especially relating to its dealings in the U.S. mortgage securitization market leading up to the financial crisis, expressing the management board's "deep regret for what happened" and saying the bank's behavior had been "completely unacceptable."

Having agreed a settlement in relation to MBS with the U.S. Department of Justice, Cryan stressed that the bank has learned its lessons from conduct that "did not meet our standards."