DB - Deutsche Bank Q3 profit rises sees upside to 2022 revenue guidance

• Deutsche Bank ( NYSE: DB ) Q3 after-tax profit increased 2.6% from Q2 and was almost four times its year-ago level as the bank's cost-cutting and restructuring efforts pay off.
• With strong performance through the first nine months of the year, the German lender sees a potential for upside to its 2022 revenue guidance of €26B-€27B.
• With many central banks raising interest rates to combat inflation, the outlook has also improved for Deutsche Bank's longer-term revenue.
• "Interest rate tailwinds have increased significantly since the second quarter with effects now well above €3B in 2025 relative to 2021," said CFO James von Moltke. "However, wider funding spreads will partially offset this benefit if they persist at these levels."
• Still, Deutsche Bank ( DB ) stock has slipped 1.4% in U.S. premarket trading.
• The company reaffirmed its guidance for provision for credit losses of ~25 basis points for the full year. PCL was 28 bps of average loans on an annualized basis in Q3 and 24 bps for the first nine months of the year.
• The company is sticking to its targets for 2025, CEO Christian Sewing said during the company's earnings call. Those goals are: revenue CAGR 3.5%-4.5%; post-tax return on tangible equity of more than 10%, and cost/income ratio of below 62.5%. Its target for cumulative capital distributions of ~€8B for 2021-2025.
• Cost/income ratio was 73% for the first nine months, down from 82% in the year-ago period and in line with its full-year guidance of mid- to low-70s.
• Deutsche Bank ( DB ) reduced its Russian credit exposures during the quarter. Additional contingent risk was lowered to €0.2B from €0.6B at the end of Q2. Comprised undrawn commitments of €0.2B, largely mitigated by Export Credit Agency coverage and contractual drawdown protection and guarantees of €0.1B. Gross loan exposure was reduced to €1.0B from €1.3B, while net loan exposure was €0.5B. In 2022 to date, additional contingent risk is down 83% and net loan exposure down 19%.
• Q3 after-tax profit was €1.24 vs. €1.21B in Q2 and €329M in the year-ago period.
• Q3 net interest income of €3.66B vs. €3.37B in the prior quarter and €2.77B in the year-ago quarter. Net interest margin grew to 1.47% in the quarter, up from 1.39% in the prior quarter and from 1.17% in the year-ago period.
• Q3 net revenue of €6.92B rose from €6.65B in Q2 and from €6.04B in Q3 2021.
• Corporate Bank revenue of €1.56B rose 1% Q/Q and 25% Y/Y; Investment Bank revenue of €2.37B fell 10% Q/Q and rose 6% Y/Y; Private Bank revenue of €2.27B increased 5% Q/Q and 13% Y/Y; Asset Management revenue of €661M increased 1% both on Q/Q and Y/Y basis.
• Q3 provision for credit losses of €350M vs. €233M in Q2 and €117M in Q3 2021.
• Q3 noninterest expenses of €4.95B vs. €4.87B in the previous quarter and €5.37B in the year-ago period.
• CET1 capital ratio of 13.3% vs. 13.0% in Q2 and 13.0% in Q3 2021.
• Earlier, Deutsche Bank reports Q3 results

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