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Deutsche Bank posts first net profit in 6 years

February 4, 2021

Defying 6 years of losses, the German lender has just posted a net profit for 2020 and set aside provisions in case of creditor defaults.

Deutsche Bank CEO Christian Sewing
CEO Christian Sewing reaches profit after job cuts, branch closuresImage: picture-alliance/dpa/A. Dedert

Deutsche Bank emerged Thursday from past investment setbacks, staff layoffs and retail branch closures with its first net profit since 2014.

The bank posted a moderate €113 million ($136 million) net profit for 2020 compared with a hefty loss of €5.7 billion in 2019 as Germany's largest lender restructured.

DB's pickup follows significant 2020 losses announced Wednesday by Germany's second-largest lender Commerzbank, which is set on slashing jobs and closing branches.

Photo montage: Commerzbank and Deutsche Bank facade logos in Frankfurt
Both undergoing hefty reforms: Frankfurt-based Commerzbank and Deutsche BankImage: Getty Images/AFP/D. Roland

Attributing DB's turnaround last year to "sustainable" investment banking efforts, DB chief executive Christian Sewing on Thursday described 2020 as "the most important year of our transformation."

"We more than compensated for the transformation costs and the increased risk provisions despite the global pandemic," said Sewing.

"A very good start to the new year has reinforced this confidence entirely," Sewing told the concern's 85,000 employees in a letter.

Profit before tax from DB's investment division in 2020 reached €3.2 billion.

Earnings as a whole rose 4% to €24 billion. Costs fell 15% to €21.2 billion.

Set-asides for creditor defaults

DB said it had set aside €1.8 billion, thereby trimming its net profit, to cope with the risks of creditors facing pandemic-induced trouble. That amount was around 2.5 times more than in 2019. 

The lender's worst-ever year — 2016 — was followed by Sewing becoming its CEO in 2018 and a restructuring plan, including 18,000 layoffs — or a fifth of its worldwide staff  — by 2022.

Last year's momentum was expected to carry though into 2021, said Sewing Thursday, adding that the bank's next key aim was to cut costs by a further €2.8 billion.

Looking skyward: A traffic light on orange outside DB's tower complex in Frankfurt
'Painful' cuts in Frankfurt, Germany's commercial hubImage: picture-alliance/dpa/A. Dedert

"We have built firm foundations for sustainable profitability and are confident that this overall positive trend will continue in 2021 despite these challenging times," said Sewing.

Commerzbank headed by ex-DB executive

At Commerzbank, also based in Frankfurt, new chief Manfred Knof, a former Deutsche Bank executive, said Wednesday "planned reductions are certainly very painful." 

The shedding of 10,000 jobs, approved by its supervisory board and negotiated with employee representatives, was expected to affect one-in-three of its jobs in Germany and lead to the closures of 340 of its 790 branches by 2024.

Commerzbank reportedly plans to pivot to online banking and cashless payment options.

Ultra-low interest rates

Across the banking sector, earnings at DB and Commerzbank have been eroded by several years of ultra-low interest rates.

The German government still holds a nearly 16% stake in Commerzbank resulting from it being bailed out during the global 2008-2009 financial crisis.

ipj/nm (Reuters, dpa, AFP)

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