Why Deutsche Bank Nixed Dividends
Trouble for Deutsche Bank: Behind Moody's Credit Rating Downgrade
Deutsche Bank will not pay dividends for two years
Germany-based Deutsche Bank (DB) has cut dividend payments for 2015 and 2016 as part of its plans to strengthen the bank’s capital. The bank, however, mentioned that it would continue to pay dividends from 2017 onwards at a “competitive payout ratio.”
It’s worth noting that ever since its establishment in 1952, Deutsche Bank has been regularly paying dividends. Since 2009, Deutsche Bank has consistently paid annual dividends of 0.75 euros, or almost $0.84, per share.
Rationale for the dividend cut
Deutsche Bank outlined company-wide financial targets aimed at cost-cutting, reduction of debt, and lowering the amount of assets exposed to potential losses. Meanwhile, Deutsche’s cost-to-income ratio has soared to 180%, partly due to exceptional losses but also because costs are generally higher than competitors, even in divisions not affected by the loss.
John Cryan, Chief Executive Officer of Deutsche Bank, has been under tremendous pressure to cut down on expenses, strengthen capital, and drive value for shareholders. European banks (EUFN) like UBS, Credit Suisse (CS), and Royal Bank of Scotland (RBS) have been grappling with high costs and tougher regulatory requirements in the wake of the sovereign debt crisis. Read on for a recap of Deutsche Bank’s 4Q15 and 2015 earnings.
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