Dealmaking helps Deutsche Bank deliver biggest profit in a decade
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[January 27, 2022] By
Tom Sims and Frank Siebelt
FRANKFURT (Reuters) - Deutsche Bank
delivered its most profitable year in a decade on the back of a
dealmaking bonanza, strengthening Chief Executive Christian Sewing's
hand as he fine tunes a new strategy and targets for the years ahead in
March.
Analysts had forecast a fourth quarter loss and shares in Germany's
largest bank rose by more than 5% after the surprise finale to 2021,
which marked the second straight annual profit following years of
losses.
Deutsche had to pay up to keep its traders and dealmakers on board,
however, with compensation at its investment bank soaring 30% in the
final quarter.
The figures represent a milestone for Sewing, who was promoted to the
top job in 2018 to turn Deutsche around after a series of embarrassing
and costly regulatory failings. (Graphic: Deutsche Bank results,
https://graphics.reuters.com/
DEUTSCHEBANK-RESULTS/klpykmeqapg/chart.png_)
"You all know how turbulent the years between 2016 and 2018 were for our
bank. Back then, we seemed to have entered a downward spiral," Sewing
told reporters.
"The downward spiral turned into an upward spiral," he said.
![](http://archives.lincolndailynews.com/2022/Jan/27/images/ads/current/graue_21BLAZER_081621.png)
Deutsche's shares, which are up by more than 30% over the past year,
were 5.7% higher at 1132 GMT after it said net profit attributable to
shareholders was 145 million euros ($163 million) in the three months
ended Dec. 31.
That compared with a profit of 51 million euros a year earlier and
contrasted with analyst expectations for a loss of around 130 million
euros.
The fourth quarter was the sixth consecutive in the black, the bank's
longest positive streak since 2012.
Deutsche made a profit of 1.94 billion euros in 2021, up from 113
million euros a year earlier, although it has still lost more than 10
billion euros over the past decade.
Regulators are still keeping a close eye on the bank, one of the most
important for the global financial system.
Sewing confirmed Deutsche was on track to achieve a key profitability
target in 2022, a return on tangible equity of 8% that many analysts
have forecast the bank will miss.
Analysts at Citigroup, which has a sell rating on Deutsche, said the
bank was "overly optimistic" and that it did not see anything in the
fourth quarter to change this view.
JPMorgan, which has an overweight rating, said the results were mixed,
but the "future is going in the right direction."
On the whole, investors expect Deutsche to deliver profits in 2022 and
2023, consensus forecasts show.
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![](../images/012722pics/aa_bus37.jpg)
A Deutsche Bank logo adorns a wall at the company's headquarters in
Frankfurt, Germany June 9, 2015. REUTERS/Ralph Orlowski//File Photo
![](http://archives.lincolndailynews.com/2022/Jan/27/images/ads/current/werth_lda_LUAL_2021.png)
Sewing said the March strategy announcements would be an evolution of the bank's
current stance, focusing on growth.
The question of a possible tie-up with another lender has been in the air since
Deutsche ended merger talks in 2019 with Commerzbank. But Sewing said he wasn't
thinking about mergers and acquisitions for 2022.
TALENT WAR
Once a thorn in Deutsche's side, the investment bank has become an important
revenue generator, benefiting from a pandemic-induced trading boom and a wave of
dealmaking that has lifted banks across Wall Street.
Revenue at the unit rose 1% to 1.913 billion euros in the fourth quarter from a
year earlier.
The investment bank's advisory business stood out, with revenue surging 156%.
Revenue for fixed-income and currency trading, one of the bank's largest
divisions, fell 14% from a strong period a year earlier as markets calmed from
their pandemic trading frenzy. That was in line with falls at U.S. competitors.
Some of the big U.S. banks' fourth-quarter results have disappointed investors
partly because of ballooning expenses, hurting profit growth.
The 30% increase in compensation and benefits at Deutsche's investment banking
unit from a year earlier was greater than the average 10% gain for the bank as a
whole, a sign it faces pressure to retain talent as the industry booms.
Sewing said he was very concerned about the increasingly intense war for talent
but he wanted to pay competitively.
"It is also clear that we cannot and do not want to avoid this competition,
because we too want to have and keep the best talent in our bank," he said.
Sewing in 2019 announced 18,000 job cuts globally and the closure of some
business lines in a bid to return to profit.
"Few observers were confident that we would be able to achieve such ambitious
objectives within three and a half years," he said in a letter to staff.
![](http://archives.lincolndailynews.com/2022/Jan/27/images/ads/current/charrons_bch_2022.png)
"Today we are proving that we keep our promises," he said.
Deutsche said on Wednesday it would pay a dividend for 2021, its first since
2018, and would also buy back shares.
($1 = 0.8917 euros)
(Reporting by Tom Sims and Frank Siebelt; Editing by Carmel Crimmins, Alexander
Smith and Mark Potter)
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