After six years of losses, Deutsche Bank finally reported a net profit of €624m ($748m) for the full year of 2020, attributable to a particularly strong performance within its investment banking division.
Remaining on target for all strategic and financial objectives, the bank recorded a profit before tax of €1bn. Group level revenues also increased by 4% to €24bn.
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The firm’s Core Bank delivered significant full year growth, with profit before tax of €3.2bn and adjusted profit before tax up by 52% to €4.2bn whilst revenues grew by 6% to €24.3bn.
Profit growth within the Core Bank helped to offset costs of the Deutsche Bank’s transformation – now in its sixth quarter – together with elevated provisions for credit losses.
Cost reduction efforts remained on target, as the firm successfully cut noninterest expenses by 15% to €21.1bn, alongside a fall in ex-transformation charges and Prime Finance-related expenses of 9% to €19.5bn.
CEO, Christian Sewing, said: “In the most important year of our transformation, we were able to more than offset transformation-related effects and elevated credit provisions – despite the global pandemic. With profit before tax of a billion euros, we’re ahead of our own expectations.”
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By GlobalDataAccording to the firm, a strengthened Common Equity Tier 1 ratio and liquidity reserves of €243bn enabled the bank to support clients during 2020. Provision for credit losses was €1.8bn – 41 basis points of average loans – for the full year.
Investment Bank division gains
Within the core businesses, the Investment Banking division registered notably strong growth across the year, with net revenues up 32% to €9.3bn.
In a message from the CEO, Sewing reported that the key drivers of growth within Investment Banking were “the enormous financing needs of many companies and sovereigns and the corresponding market activity – and the fact that we are ideally positioned to support our clients in such an environment.”
Within the fourth quarter, net revenues rose 24% to €1.9bn driven by a 52% rise in Origination & Advisory to 532 million euros and a 17% rise in FIC Sales & Trading revenues to 1.4 billion euros.
However, Sewing argued that the success of the Private Bank and the Corporate Bank should not be overlooked: “In a challenging environment, with historically low interest rates, our teams managed to keep revenues stable and to deliver in line with our plans in both areas. This is a remarkable accomplishment.”
Revenues at the Private Bank were down €8.1bn, or 1%, and essentially flat if adjusted for specific items, including a negative impact of €88m arising from the sale of Postbank Systems.
The Private Bank largely offset significant interest rate headwinds and the impact of COVID-19 through net inflows of investment products of €16bn, net new client loans of €13bn, and deposit repricing agreements on accounts with a total value of €9bn.
Finalising transformation
Since 2018, Deutsche Bank has undertaken a full-fledged restructuring of the business, prompted by the appointment of Christian Sewing as group CEO. The bank, having faced financial difficulty and legal issues, had announced the restructuring in hopes of boosting profit margins.
Looking forward to 2021, Deutsche Bank has already begun the third phase of its transformation, where the focus will be sustainable profitability.
Sewing concluded: “Let’s build on our achievements together and on the new spirit in our bank. Challenges will continue to emerge during 2021, not least because the fight against the pandemic continues. But there are opportunities for us – and they are significant.
“We are well positioned for an economic environment in which financing demand remains high; wealth preservation and global trade become more complex; and sustainability rapidly gains in importance. The economy is facing major upheavals – and we are being called on to support and help shape its transformation.
