Deutsche Bank is back in the black for the first time since 2014.
Deutsche Bank has made a net profit for the first time in six years on the back of a global trading boom that has boosted the lender’s fixed-income trading revenue.
IAfter racking up €5.7bn of net losses in 2019, Germany’s largest lender on Thursday reported a net profit of €113m for 2020, the first since 2014 and higher than expected by analysts. The bank’s performance was driven by a 28 per cent year-on-year surge in bond and rates trading revenue, which rose to the highest level since 2016.
Deutsche has been in the midst of a strategic turnround
since July 2019, when chief executive Christian Sewing promised to reduce the
lender’s reliance on investment banking revenues and to refocus it on its “more
stable and predictable” retail and commercial banking activities as well as
asset management. However, all business units except the investment bank
reported shrinking revenue in 2020.
Despite last year’s return to profitability the lender has
racked up combined losses of €14.6bn since 2015.
“We are ahead of our own expectations,” Mr Sewing said in a
statement, adding that he was confident that the “overall positive trend will
continue in 2021, despite these challenging times”.
Chief financial officer James von Moltke said the trading
boom continued into January. “We’ve seen that momentum carry through to the
first few weeks of 2021, which is encouraging for us in terms of the outlook,”
he said in an interview with Bloomberg Television.
Anke Reingen, an analyst at RBC Capital Markets, said Deutsche’s
optimism should be taken with a pinch of salt as the “outlook remains
uncertain”.
Despite the investment bank’s rebound, Deutsche’s return on
tangible equity last year stood at just 0.2 per cent, far below the 8 per cent
the bank is promising by 2022.
Andrew Coombs, an analyst at Citigroup, said the German
lender’s performance was “decent” but warned that it was “unlikely to be
extrapolated” as investment banking revenue would probably normalise this year.
Shares in Deutsche Bank lost almost 2 per cent in early
morning trading on Thursday. However, they are up close to 80 per cent since
hitting an all-time low of €4.87 last March amid concerns about the economic
fallout from the Covid-19 pandemic.
While provisions for credit losses more than doubled during
the year to €1.8bn, Deutsche’s common equity tier one ratio — a key benchmark
of balance sheet strength — remained steady at 13.6 per cent of risk-weighted
assets.
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