Profits at Deutsche Bank’s investment bank almost halve in fourth quarter
Falling trading revenue and rising costs hit division that generated two-fifths of group revenue for full year
Pre-tax profits at Deutsche Bank’s investment banking business almost halved at the end of last year as the division was hit by falling trading revenue, soaring costs and higher provisions for bad loans
The lender said on Thursday the investment bank, which generated almost two-fifths of the group’s revenue for the full year, eked out a pre-tax profit of €319m in the fourth quarter, down from €599m a year earlier. Analysts had expected a profit of €407m from the unit.
Between October and December, revenue from fixed income and currency trading was 14 per cent lower than a year ago as the pandemic-driven trading frenzy on the capital markets eased. At the same time, the division’s payroll costs jumped 30 per cent, pushing up total costs by more than a quarter. Loan-loss provisions doubled.
Overall, the bank’s full-year profit in 2021 quadrupled to €2.5bn and reached the highest level since 2011. The return on equity rose to 3.4 per cent and was below the bank’s 2022 target of at least 8 per cent.
Deutsche on Wednesday said it would resume dividend payments worth €400m this year. It will also buy back €300m of shares, representing just above 1 per cent of its market capitalisation. Chief executive Christian Sewing shelved the dividend in 2019 when he announced a radical restructuring plan that will cost the bank almost €9bn in restructuring expenses by 2022.
“We are delighted to be resuming capital distributions to our shareholders as we promised in the summer of 2019,” Sewing said in a statement, adding that the share buybacks and the dividend were the first steps in delivering his promise to hand back €5bn to investors.
Deutsche’s core tier one equity ratio, a key indicator of balance sheet strength, fell by 0.4 percentage points to 13.2 per cent of risk weighted assets at the end of the year.