Deutsche Bank posts a surprise profit on strong investment bank performance

LONDON — Deutsche Bank on Thursday defied market expectations to post a profit for the fourth quarter of 2021, as investment bank revenues rose.

The German lender said profit attributable to shareholders came in at 145 million euro ($162.7 million) for the final three months of the year — a sixth consecutive quarter of profit and almost triple its profit for the same period in 2020.

Analysts had expected a loss of 127.58 million euros, according to Refinitiv estimates.

The quarterly figures took Deutsche Bank’s full-year net profit for 2021 to 1.94 billion euros after a strong first half to the year. This was up from 113 million euros in 2020 and above analyst projections of 1.79 billion euros.

Several of the bank’s Wall Street peers, such as JPMorgan and Morgan Stanley, have endured a disappointing earnings season as higher costs and moderating revenues squeezed margins.

However, Deutsche Bank’s investment bank division saw quarterly revenues climb to 1.9 billion euros, up 1% year-on-year, as a 14% fall in fixed income and currency (FIC) trading was offset by 29% growth in origination and advisory revenues.

Here are the other quarterly highlights:

• Loan loss provisions stood at 254 million euros, compared to 251 million euros in the fourth quarter of 2020.
• Common equity tier 1 (CET1) ratio — a measure of bank solvency — came in at 13.2%, compared to 13.6% at the end of the previous year.
• Total net revenue was 5.9 billion euros, versus 5.45 billion euros for the same period in 2020.

CFO James von Moltke told CNBC on Thursday that underlying momentum was strong across the bank’s businesses, but particularly visible in the corporate bank, where quarterly net revenues came in at 1.4 billion euros, up 10% year-on-year.

“In our trading businesses, naturally we had some impact from the disrupted markets that were prevalent in November and December, but we think we navigated through that reasonably well, and we see again the underlying trend still carrying forward in 2022,” von Moltke said.

He also noted that rising interest rates will provide a further boost to most of Deutsche Bank’s businesses in 2022 and beyond.

“We have actually added some new disclosure this quarter for investors to look at, and that shows that we will have swung from a headwind on revenues,” he said.

“So 2021 revenues were burdened by about 750 million [euros] relative to 2020. We swing to the positive in 2022 by about 150 million and that grows to 900 million by 2025, and that’s just on the basis of the current rate curves.”

For the full-year, net profit hit 2.5 billion euros, the bank’s highest figure since 2011.

“In 2021, we increased our net profit fourfold and delivered our best result in ten years while putting almost all of our expected transformation costs behind us,” Deutsche Bank CEO Christian Sewing said in a statement. “All four core businesses performed at or ahead of our plan, and our reduction of legacy assets progressed faster than expected.”

Sewing said this progress and financial performance provided a “strong step-off point” to achieve the bank’s target of a return on tangible equity of 8% in 2022.

In 2019, Deutsche Bank launched a sweeping restructuring plan to reduce costs and improve profitability, which involved exiting its global equities sales and trading operations, scaling back its investment banking and slashing around 18,000 jobs by 2022.

The bank said non-interest expenses were up 1% in 2021 to 21.5 billion euros, with transformation-related effects of 1.5 billion euros, a 21% annual increase. Deutsche Bank said 97% of its expected transformation-related costs through the end of 2022 had now been recognized.

Deutsche Bank shares added nearly 5% on Thursday morning.

This is a breaking news story and will be updated shortly.