Deutsche Bank posted its highest quarterly profit since 2014, driven by a boom in bond trading, strong asset management results and a clean exit from its exposure to family office Archegos Capital.
Germany’s largest lender generated net profit of € 908 million in the first three months of 2021, compared to € 43 million in the first quarter of 2020.
Deutsche also raised its full-year outlook for 2021, saying it expects sales to be “essentially flat” compared to previous expectations of a year-over-year decline.
Years of heavy losses, declining market share and repeated battles in the boardroom prompted chief executive Christian Sewing to begin the group’s most radical restructuring in two decades in mid-2019, reducing the underperforming investment bank, drastically turning the lender’s balance sheet downsized and 18,000 jobs were cut. by 2022.
While heavy restructuring costs caused losses of € 5.7 billion in 2019, the lender is now profitable again, with net profit of € 113 million last year.
“Our first quarter is further proof that Deutsche Bank is on the right track in all four core businesses and is working towards sustainable profitability,” said Sewing.
The results exceeded analyst expectations by nearly 60 percent. Deutsche’s return on tangible equity – a key measure of profitability – was 7.4 percent in the first quarter and was close to its target of 8 percent for 2022.
The main driver of performance was the investment bank, which reported year-over-year sales growth of 32 percent to € 3.1 billion, and the group’s asset management unit, which increased sales by 23 percent to € 637 million. Both exceed analyst expectations.
Bloomberg previously reported that Deutsche had an exposure of € 3.4 billion to the affected investment group Archegos. Unlike many of its peers – including rivals UBS and Credit Suisse – who have suffered heavy losses, the bank said on Thursday that it was able to dissolve its position without a hit.
Deutsche’s private bank and corporate bank, previously touted by Sewing as divisions that could help wean the lender from erratic investment banking earnings, both reported declining earnings. Declining loan loss provisions increased pre-tax profit for the two units.
Deutsche’s common equity tier 1 ratio – a key indicator of balance sheet strength – rose to 13.7 percent of risk-weighted assets from 12.8 percent a year ago.