Deutsche Bank clinches third straight annual profit on Q4 2022 earnings surge

DEUTSCHE Bank reported a surge in fourth-quarter earnings on Thursday (Feb 2), exceeding expectations and contributing to a third consecutive year of profit, helped by higher interest rates and buoyant trading.

The period marked an end to a 9 billion euro (S$12.9 billion) four-year turnaround plan put in place by one of the world’s most systemically important banks, after years of losses.

The plan stabilised the bank, while a rise in interest rates gave lenders an additional lift. Deutsche said the latter would continue to boost revenue in 2023.

Net profit attributable to shareholders was 1.8 billion euros in the three months to Dec 31, 2022. This beat the profit of 145 million euros a year earlier, and trounced analysts’ expectations of a 951 million euro gain.

It also marked a tenth consecutive quarter of profit – the bank’s longest streak in the black in at least a decade – though returns were dampened by an industry slump in dealmaking.

Full-year profit jumped to 5 billion euros from 1.9 billion euros a year earlier, beating the 4.2 billion euros expected by analysts. It was the largest annual profit since 2007, Deutsche said, and was helped by a 1.4 billion euro tax benefit.

Germany’s biggest bank also exceeded its 8 per cent target for return on tangible equity, reaching 9.4 per cent. This achieved a milestone that chief executive Christian Sewing had set for the bank when it embarked on a major overhaul in 2019.

“Over the past three and a half years, we have successfully transformed Deutsche Bank,” said Sewing, who was promoted to the top job in 2018 to turn Deutsche around after a series of costly regulatory failings.

Still, analysts said the bank is vulnerable to a slower economy, high inflation rates, war on the continent and regulatory issues that have plagued it over the years.

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Deutsche Bank in 2019 set out on a journey to reduce reliance on its volatile investment bank and restore profitability through more stable businesses serving companies and retail customers. Things did not quite turn out that way, though the tide has turned more recently.

Revenue at Deutsche’s investment bank fell to 1.7 billion euros in the fourth quarter of 2022, down 12 per cent from a year earlier and below expectations of 1.9 billion euros.

The investment bank’s origination and advisory business stood out, with revenue dropping 71 per cent, mirroring slumps at other banks including Goldman Sachs and JPMorgan.

Revenue for fixed-income and currency trading, one of the bank’s largest divisions, rose 27 per cent to 1.5 billion euros. But this was still short of the 1.7 billion euros expected by analysts.

The performance will be reflected in bonuses. Reuters earlier reported that the investment bank’s bonus pool for last year would fall by somewhat less than 10 per cent, providing more evidence of tougher times in finance.

The investment bank’s revenue decline was countered by gains in corporate and retail banking, which registered increases of 30 per cent and 23 per cent respectively. The divisions had long stagnated under ultra-low interest rates that lasted longer than expected. REUTERS