Thursday, February 04, 2021
First surplus since 2014
Deutsche Bank returns to profit
Deutsche Bank will end its series of losses in the 2020 pandemic. For the first time since 2014, the bank is making a bottom line profit.
The board of directors explains this with the radical restructuring of the group. There was a steep upward trend in one division in particular.
In 2020, Deutsche Bank made a profit for the first time in six years. "In the most important year of our restructuring, we succeeded in more than compensating for the transformation costs and increased risk provisioning – despite the global pandemic," said CEO Christian Sewing. The bottom line – after deducting interest payments for subordinated bonds – was a profit of 113 million euros.
In 2019, the largest German financial institution had amassed a loss of 5.7 billion euros due to the costs of the group restructuring. The shares gained a good one percent in pre-market trading. Last year, like other banks, things went particularly well in investment banking. It was the only line of business in which the bank could increase its earnings. In the business with private and corporate customers, on the other hand, the corona crisis and low interest rates left their mark, and revenues fell.
The total income of the bank increased by four percent to 24.03 billion euros. Due to the economic consequences of the Corona crisis, the risk provision for bad loans increased significantly to 1.8 billion euros, but was at the level communicated by the bank in December. The costs fell by 15 percent to 21.2 billion euros. Before taxes, the balance sheet posted a profit of one billion euros in 2020, after a loss of 2.6 billion euros in the previous year.
Criticism of the dominance of investment banking
Sewing gave a confident outlook. With last year's result, the company's own expectations were exceeded, he said. "We are sustainably profitable and confident that the overall positive trend in 2021 will continue even in these difficult times." The bank sees itself in a good position to achieve the expected return on equity of eight percent in 2022.
Sewing warned months ago that the positive trend in investment banking could weaken. In the fourth quarter, business with bonds and currencies as well as lucrative advice on bond issues and IPOs went particularly well due to the turbulence resulting from the Corona crisis. Regulators and some analysts criticize the fact that the volatile capital market business is once again playing such an important role for Deutsche Bank.
Sewing actually wanted to achieve more balance between the individual divisions with the group restructuring initiated in summer 2019. The renovation will cut 18,000 jobs worldwide.
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