FRANKFURT (Reuters) – Deutsche Bank (DBKGn.DE) said on Thursday that fourth-quarter earnings beat expectations, helping it post a third straight year of profit on the back of rising interest rates and strong trading.
The period marked the end of a €9 billion ($9.9 billion) four-year turnaround plan implemented by one of the world’s most systemically important banks after years of deficits. .
The plan will stabilize the bank, and higher interest rates will give lenders an extra lift, Deutsche said, which will continue to boost earnings in 2023.
Net profit attributable to shareholders was €1.83 billion for the three months to 31 December. This compares with his €145 million in the same period last year and analysts’ expectations of about €951 million.
An industry downturn in dealmaking dampened returns, but it was the 10th straight quarter of profit, the longest in at least a decade.
Profits for the full year jumped to €5.025 billion from €1.94 billion a year earlier, beating analyst expectations of €4.174 billion. According to Deutsche, this is his biggest annual profit since 2007, which is underpinned by his €1.4 billion tax benefits.
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Germany’s largest bank also surpassed its 8% return on tangible equity target, reaching a figure of 9.4%, with CEO Christian Sewing joining the bank in 2019 when it embarked on a major transformation. You have achieved the milestone you set.
“Over the past three-and-a-half years, we have successfully transformed Deutsche Bank,” said Zewing, who was promoted to the top job in 2018 to turn Germany around after a series of costly regulatory failures. .
Still, analysts say banks are vulnerable to an economic slowdown, high inflation, war on the continent and long-standing regulatory issues.
In 2019, Deutsche Bank embarked on a journey to reduce its reliance on volatile investment banking and restore profitability through a more stable business serving corporate and individual clients.
The tide has turned recently, but it didn’t turn out that way.
German investment banking revenues fell to €1.7 billion in the fourth quarter, down 12% year-on-year and below expectations of €1.9 billion.
Investment banking origination and advisory businesses stood out, with revenues down 71%, reflecting weakness at other banks such as Goldman Sachs and JP Morgan.
Revenues in fixed income and currency trading, one of the bank’s largest divisions, rose 27% to €1.5bn, still short of analyst expectations of €1.7bn.
Performance is reflected in bonuses. Investment bank bonus pools fell by just under 10% last year, Reuters reports, providing further evidence that finance is in a tougher time.
Lower Investment Bank income was offset by Corporate Banking and Retail Banking earnings, which posted increases of 30% and 23% respectively. With ultra-low interest rates lasting longer than expected, the sector has been stagnating for a long time.
($1 = 0.9087 EUR)
Reporting by Tom Sims and Marta Orosz Editing by Janane Venkatraman, Christopher Cushing and David Goodman
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