Complaints from Postbank customers, costs running into millions and problems at the fund subsidiary DWS: The change in computer systems is putting a strain on Deutsche Bank. CFO James von Moltke estimated the additional costs associated with Postbank on Wednesday at around 30 to 35 million euros in the fourth quarter.
In the third quarter it was less than 10 million euros, said von Moltke when presenting the quarterly balance sheet. At the same time, the conversion of the IT systems at the fund subsidiary DWS is getting out of control.
Nevertheless, in a letter to employees, group boss Christian Sewing was confident that he would not only be able to achieve the strategic goals set for 2025, but even exceed them.
In recent months there have been significant complaints from Postbank customers, particularly in connection with the IT change, in which twelve million Postbank customers were gradually brought together on one platform with seven million Deutsche Bank customers in Germany. According to consumer advocates, they complained, for example, about blocked accounts and delayed follow-up financing. A special representative on behalf of the financial regulator Bafin is now monitoring that Deutsche Bank gets the problems under control.
Sewing: Two thirds of the backlog processed
According to Sewing, two thirds of the backlog has now been processed. “This gives us great confidence that we will be able to offer our customers the level of service that they rightly expect from us as planned by the end of the year,” wrote the CEO in a letter to employees. According to its own statements, the institute has made great progress, especially with seizure protection accounts, in which indebted people can protect assets from seizure, and payouts of construction financing at the DSL Bank.
In connection with the Postbank problems, Deutsche Bank set aside 25 million euros as risk provisions for possible loan defaults. A similar amount could be incurred in the fourth quarter, said Moltke’s finance director.
There are also difficulties in converting the computer systems of the fund subsidiary DWS. The original plans were too optimistic in terms of time and costs, said DWS boss Stefan Hoops. “It is clear at this point that we will have another year of significant IT build-out costs, corresponding to 2023, leading to further transformation costs in 2024.” This involves around 100 million euros each. In addition, the hoped-for savings are unlikely to occur until later, said Hoops.
In contrast to the IT conversion at Postbank, DWS is not about customer-related systems. The fund company wants to break away from its parent company in many administrative processes – as long as it can do it itself and cheaper.
Strong business in the corporate bank
In the third quarter, Deutsche Bank suffered a decline in profits due to higher taxes. While pre-tax profit rose by seven percent to 1.7 billion euros, shareholders received a surplus of over one billion euros, eight percent less than a year earlier. However, analysts had expected a steeper decline. The financial institution only set aside a total of 245 million euros for possible loan defaults, around 100 million less than a year earlier.
Despite the sharp rise in interest rates, the DAX group’s total income only grew by three percent to 7.1 billion euros. While there was a significant increase in the corporate bank and a slight increase in the private customer bank, the group suffered declines in the investment bank and the fund subsidiary DWS. The more difficult market environment slowed down business in both segments.
The fact that Germany’s largest financial institution earned more before taxes than in the previous year was thanks to its own corporate bank. The division doubled its pre-tax earnings to 805 million euros, while the other areas achieved less profit before taxes than in the third quarter of 2022. CEO Sewing now expects higher earnings for the group for the year as a whole: They should reach around 29 billion euros, or about that upper end of the previous target range.
