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Deutsche Financial institution posts shock revenue on sturdy funding financial institution efficiency

LONDON — Deutsche Bank defied market expectations on Thursday to report a profit for the fourth quarter of 2021 as investment banking revenues rose.

The German lender said earnings attributable to shareholders were 145 million euros ($162.7 million) for the final three months of the year — a sixth straight quarter of earnings and almost triple earnings for the same period in 2020 .

According to estimates by Refinitiv, analysts had expected a loss of 127.58 million euros.

The quarterly figures brought Deutsche Bank's net income for 2021 to EUR 1.94 billion after a strong first half of the year. This was up from 113 million euros in 2020 and above analysts' forecasts of 1.79 billion euros.

Several of the bank's Wall Street peers, such as JPMorgan and Morgan Stanley, have had a disappointing earnings season as higher expenses and weaker earnings squeezed margins.

However, Deutsche Bank's investment banking arm saw quarterly revenue rise to 1.9 billion euros, up 1% year-on-year as a 14% decline in fixed income and currency (FIC) trading was offset by a 29% growth in issuance and consulting income was offset .

Here are the other quarterly highlights:

Loan loss provisions were €254 million compared to €251 million in the fourth quarter of 2020. The Common Equity Tier 1 (CET1) ratio – a measure of banks' solvency – was 13.2%, compared to 13.6% at the end of 2020 Previous year. Total net sales were 5.9 billion euros compared to 5.45 billion euros in the same period of 2020.

CFO James von Moltke told CNBC on Thursday that the underlying momentum is strong across all of the bank's businesses, but is particularly visible in the corporate bank, where quarterly net income was 1.4 billion euros, up 10% year-on-year.

"In our trades we have of course had some impact from the disrupted markets that prevailed in November and December but we believe we have weathered this reasonably well and again we see the underlying trend continuing in 2022," said by Moltke.

He also pointed out that rising interest rates will give most of Deutsche Bank's deals another boost in 2022 and beyond.

"We actually added some new disclosures this quarter for investors to look at, and that shows we will have moved away from a revenue headwind," he said.

“So the 2021 revenue was impacted by about 750 million (euro) compared to 2020. We swing about 150 million positive in 2022 and that grows to 900 million by 2025, based only on current price curves.”

For the full year, net profit reached 2.5 billion euros, the bank's highest since 2011.

"In 2021, we quadrupled our net income and delivered our best result in ten years, while weathering almost all of our anticipated transformation costs," Deutsche Bank Chief Executive Officer Christian Sewing said in a statement. "All four core businesses have met or exceeded our targets and our legacy clean-up has progressed faster than expected."

Sewing said this progress and financial performance provides a "strong starting point" to meet the bank's target of an 8% return on tangible equity in 2022.

In 2019, Deutsche Bank embarked on a major restructuring plan to reduce costs and improve profitability. These included exiting the global equity sales and trading business, reducing investment banking and cutting about 18,000 jobs by 2022.

The bank said noninterest expenses rose 1% to 21.5 billion euros in 2021, with transformation effects of 1.5 billion euros, an annual increase of 21%. Deutsche Bank said 97% of its expected transformation costs by the end of 2022 have already been captured.

Deutsche Bank shares were up nearly 5% Thursday morning.

This is breaking news and will be updated shortly.

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