Investing.com -- Deutsche Bank AG NA O.N. (ETR:DBKGn) released its 2024 annual report on Thursday, in which the bank reiterated its 2025 guidance and pointed to higher long-term return on tangible equity (ROTE) ambitions.
The bank saw revenue gains in 2024, but overall profit declined as higher compensation costs weighed on results.
The report, which disclosed a sharp rise in bonuses for the first time, showed the bonus pool increased by around 25% to €2.5 billion. Strong revenue growth at the investment bank, which rose 15% last year, was a key factor behind the increase.
Looking ahead, Deutsche Bank reaffirmed its revenue forecast, expecting annual growth of 5.5-6.5% between 2021 and 2025.
For 2025, the bank anticipates group revenues of €32 billion, consistent with previous guidance and slightly above the consensus estimate of €31.8 billion.
Deutsche Bank flagged the automotive sector as an area of concern, given its significance to Germany’s economy.
Major carmakers such as Volkswagen (ETR:VOWG_p) and Mercedes-Benz (OTC:MBGAF) face headwinds from potential U.S. tariffs, sluggish economic conditions, slow progress in electric vehicle adoption, and rising competition from China.
The bank described the sector as posing a “growing risk” to its auto and supplier portfolio, which it is “monitoring closely.”
Commercial real estate, another long-standing risk area for the bank, remains under pressure, though Deutsche said the industry is on track to stabilize.
The year ahead is pivotal for CEO Christian Sewing, who is working to meet ambitious profit and cost targets set for the bank. Some analysts remain cautious about whether those goals can be fully realized.
While the bank expects slight economic softening in the U.S. and an improvement in eurozone growth, it warned that “Germany is expected to lag behind.”
Deutsche Bank “sees 2025 as a crucial milestone as it will be judged at the end of the year if successful with transformation and growth strategy,” RBC Capital Markets analysts said.
What’s more, this year, the bank also aims to set the stage for growth beyond 2025 by focusing on optimizing its operating model and improving capital allocation.
It expects that a combination of new revenue opportunities and greater efficiency will provide room for a return on tangible equity (ROTE) that significantly surpasses its 2025 target of over 10%.
Deutsche Bank’s long-term incentive plan for management board compensation maintains an unchanged ROTE target of 11% for 2024-2026, with a lower limit of 9% and an upper limit of 12%.
For the 2025-2027 plan, the bank has raised its target to 12%, setting a lower limit of 10% and an upper limit of 13%.