The Russian troops were already on the Ukrainian border when Deutsche Bank, together with other financial institutions, extended a loan of 870 million dollars to a Oil company in Irkutsk awarded, on the penultimate day of 2021. The largest German financial institution proudly referred to the “long history of supporting important infrastructure projects in Russia”. A few days earlier, the bank had opened new offices in Moscow, which is also a sign that the bank is fully committed to the Russian market.
The tone has changed a little since then. On Thursday, Deutsche Bank boss Christian Sewing emphasized that the commitment in Russia was “very limited” and “largely secured”. The presence and business there have been significantly reduced since 2014 and have been reduced in the past two weeks, he said at the investor day of the money house. In fact, Deutsche Bank hasn’t been at the forefront in Russia lately. Other financial institutions in Europe have spread much more there, such as the Italian Unicredit, the French Société Générale or even the Raiffeisen Bank International from Austria, some of which now have to reckon with billions in losses.
Nevertheless, Deutsche Bank also has to put up with criticism from government organizations, for example. “For years, German financial institutions have helped to strengthen Putin’s power and the Russian fossil fuel economy on which it is based,” says Kathrin Petz, the organization’s banking expert jungle. Deutsche Bank is the fourth European bank to provide syndicated loans to the four leading Russian oil and gas companies Gazprom, Lukoil, Rosneft and Novatek over the past five years. That has to end.
However, the bank is not currently questioning its business in Russia. However, they support the decisions of the federal government and implement the sanctions immediately. Most of the customers who operate in Russia or have Russia-related needs are EU companies or multinationals. Because they are now adjusting their business relationships in or with Russia, Deutsche Bank must do the same “if necessary”. At the end of 2021, however, the bank had only issued 600 million euros in net loans in relation to Russia. Gross, i.e. including guarantees, was 1.4 billion euros – which corresponds to around 0.3 percent of all loans issued. That sounds little, but it’s just under 20 percent of its expected net profit for 2022.
Shareholders can expect a higher dividend
First and foremost, CEO Sewing wanted to talk about a new three-year plan on Thursday. This is now being overshadowed by the Ukraine war, which is also causing massive uncertainty in the economy: What second-round effects will the crisis have? What do rising energy prices mean? How is globalization going? And are new crises threatened by food shortages? Bank stocks across Europe have been under pressure for days, even more than the stocks in other sectors. The analysts also asked the bank many questions on Thursday.
Sewing sees Deutsche Bank as well-prepared for troubled times: the bank’s services are particularly in demand in the short and medium term, for example to finance the energy transition. Despite the war, the bank management is also sticking to the goal announced in 2019 of achieving an eight percent return on equity this year and paying out a dividend.
An after-tax return of more than ten percent is now being targeted by 2025. The shareholders should also benefit from this: for the years 2021 to 2025, the institute wants to distribute around eight billion euros. Fund manager Alexandra Annecke from Union Investment welcomed the new goals, above all the “strong focus on cost discipline” was a big and important step. Anyway, Sewing was extremely self-confident. They are convinced that in the second half of the decade they will play an essential role in European banking as a “global house bank”https://www.sueddeutsche.de/wirtschaft/.”No other bank is as well positioned for this as we are”.