Deutsche Bank posted its highest quarterly profit since 2014, thanks to a boom in bond trading, strong results in asset management and a net exit from its exposure to the Archegos Capital family office.
Germany’s largest lender generated net profit of 908 million euros in the first three months of 2021, up from 43 million euros in the first quarter of 2020.
Deutsche also raised its outlook for 2021, saying it expects revenue to be “mostly flat”, compared to previous forecasts of a year-over-year decline.
Years of heavy losses, declining market share and repeated board battles led CEO Christian Sewing in mid-2019 to embark on the most radical restructuring of the group in two decades, involving the reduction of the underperforming investment bank, the drastic reduction of the lender’s balance sheet and the elimination of 18,000 jobs. by 2022.
While heavy restructuring costs caused losses of 5.7 billion euros in 2019, the lender has now returned to profitability, having reported a net profit of 113 million euros last year.
“Our first quarter is further proof that Deutsche Bank is on track across all four core businesses and is building sustainable profitability,” Sewing said.
The results exceeded analysts’ expectations by almost 60%. Deutsche’s return on tangible equity – a key benchmark for profitability – stood at 7.4% in the first quarter and was close to its 8% target for 2022.
The main driver of performance was investment banking, which recorded a 32% year-over-year increase in revenue to 3.1 billion euros, and the asset management unit of group, whose turnover increased by 23% to 637 million euros. Both have exceeded analysts’ expectations.
Bloomberg earlier reported that Deutsche had € 3.4 billion exposure to a struggling investment group Archegos. However, unlike many peers – including rivals UBS and Credit Suisse – who have incurred Heavy losses, the bank said Thursday it was able to unwind its position without taking a hit.
Deutsche’s private bank and corporate bank, which had previously been touted by Sewing as divisions that could help the lender wean off fickle income from the investment bank, both reported declining revenues. However, lower provisions for credit losses pushed up pre-tax profits for both units.
Deutsche’s Tier 1 common stock ratio – a key indicator of balance sheet strength – rose to 13.7% of risk-weighted assets, from 12.8% a year ago.