FRANKFURT: Deutsche Bank swung to a small annual profit in 2020, its first since 2014, on the back of strong gains at its investment banking division, the German lender said on Thursday (Feb 4).
The return to profit is a victory for Chief Executive Christian Sewing, who was promoted in 2018 to turn around Germany's largest lender after years of losses and steep fines over money laundering failings and its role in the mortgage crisis.
Over the past 10 years, Deutsche has lost a total €8.2 billion (US$9.84 billion). Analysts believe the bank is set to post another profit in 2021, according to a consensus forecast.
"We have built firm foundations for sustainable profitability and are confident that this overall positive trend will continue in 2021, despite these challenging times," Sewing said.
The net profit attributable to shareholders of €113 million (US$135.69 million) compares with a 2019 loss of €5.7 billion. Analysts had expected a loss of about €300 million for 2020.
Shares were up 3.7 per cent in pre-market trade.
A big question for analysts is how sustainable the profits will be. Deutsche Bank, like its competitors, experienced a trading boom because of market volatility linked to the COVID-19 pandemic, boosting its investment bank last year.
Revenue at the division rose 32 per cent to €9.28 billion in 2020, while revenue from its key fixed-income and currency sales and trading business climbed 28 per cent.
Low interest rates and a slowdown in global trade pressured revenue at Deutsche's other divisions, such as those for corporate and retail clients.
The bank has been trying to become less reliant on its investment bank in an effort to stabilise business.
Sewing, in announcing 18,000 job cuts and the closure of its global equities business in a major revamp announced in 2019, said the investment bank should contribute only 30 per cent of core revenues. In 2020 the division accounted for close to 40 per cent of core revenue.
Deutsche Bank ended the year with a fourth-quarter net profit of €51 million, against a net loss of €1.6 billion in the same period a year earlier and analyst expectations for a loss.