Deutsche Bank swings to net profit in 2020, its first since 2014

FRANKFURT (Reuters): 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.

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 euros ($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 euros ($135.69 million) compares with a 2019 loss of 5.7 billion euros. Analysts had expected a loss of about 300 million euros for 2020.

Shares were up 3.7% in premarket 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% to 9.28 billion euros in 2020, while revenue from its key fixed-income and currency sales and trading business climbed 28%.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% of core revenues. In 2020 the division accounted for close to 40% of core revenue.

Deutsche Bank ended the year with a fourth-quarter net profit of 51 million euros, against a net loss of 1.6 billion euros in the same period a year earlier and analyst expectations for a loss.