By Tom Sims and Alexander Hübner
FRANKFURT (Reuters) – Deutsche Bank on Thursday labelled the auto sector as a key risk, a bleak warning from Germany’s largest lender as the nation lines up big spending in defence and infrastructure.
The bank pointed to potential U.S. tariffs, a challenging economy, a slow transition to electric vehicles, and competition from China.
Deutsche, which disclosed the issue in its annual report, said the sector poses a “growing risk” to the bank’s auto and supplier portfolio and is being “monitored closely”.
Germany is home to some of the world’s most renowned carmakers, including Volkswagen and Mercedes-Benz. Volkswagen this week foreast another challenging year.
Investors have nevertheless recently become more optimistic about Deutsche Bank’s prospects after top German politicians agreed to a spending plan for defence and infrastructure that could boost the sluggish economy.
The bank’s shares have soared.
“Defence can be a huge impulse, positive impulse for the economy,” the bank’s CEO Christian Sewing said in a recent podcast.
In its annual report, Deutsche Bank forecast increased revenue this year at its investment bank and three other main business units, putting a brave face on 2025 prospects despite a a still weak economy at home and the car industry’s woes.
The outlook is the bank’s most detailed projection yet for its performance in 2025.
Last year also saw revenue gains, but an overall drop in profit, amid significant rises in bonuses and banker pay that was also disclosed in Thursday’s report for the first time.
This year is crucial for CEO Sewing, who is striving to meet a series of ambitious profit and cost targets he has set for the once-troubled bank. Some analysts have been sceptical that Deutsche will reach all its goals.
The U.S. economy may slow slightly, while euro zone growth may accelerate. “But Germany is expected to lag behind,” Deutsche said.
Another key risk the bank has identified in previous years has been its exposure to the commercial real estate industry. Deutsche said problems still exist but that the sector is geared stabilise.
Deutsche’s additional alert on the auto sector’s weakness is a new development.
Deutsche said that the grim outlook for cars has had limited impact on its portfolio so far, which accounts for some 1.5% of its overall loans.
($1 = 0.9190 euros)
(Reporting by Tom Sims and Alexander Huebner, Editing by Rachel More and Tomasz Janowski)
