Deutsche Bank surprises with best quarter since 2014

Deutsche Bank posted a better-than-expected net profit for the 1st quarter as strength at its investment bank helped offset headwinds from restructuring and the pandemic.

Deutsche painted a rosier look for 2021, saying it now expects revenue to be "essentially flat," compared with a previous estimate of "marginally lower." The shares opened 4.4% higher.

The German lender on Wednesday, April 28, reported a 1st quarter net profit attributable to shareholders of 908 million euros ($1.1 billion) versus a year-earlier loss of 43 million. That beat the profit of almost 600 million expected by analysts.

It was the strongest quarter for Deutsche since the 1st quarter of 2014, as revenue at its fixed-income trading business and origination and advisory services surged, trends that have also lifted profits of competing banks.

The figures are good news for chief executive officer Christian Sewing, who embarked on a radical restructuring two years ago that involved shedding 18,000 staff in an effort to return the bank to profitability.

"These results give us confidence that we'll reach our 2022 targets," Sewing said in a statement.

Analysts at Citigroup called it "an impressive quarter" but justified a "sell" rating with expectations the bank will miss a key profitability target – 8% return on tangible equity in 2022.

The investment bank's resilience showed last year, helping Deutsche eke out a small profit for 2020 – its first after 5 years of losses.

Questions have remained about the sustainability of its investment banking boom, but analysts expect Deutsche to deliver another profit in 2021, a consensus forecast of their estimates shows.

Deutsche's key fixed-income and currency sales and trading business, with revenue up 34% at nearly 2.5 billion euros, marked its best quarter since 2015.

That growth is better than some US investment banks. Goldman Sachs reported a 31% rise in such trading in the 1st quarter, while those at JPMorgan were up 15%.

Origination and advisory services revenue at Deutsche, up 40%, showed its best quarter since 2017.

However, low interest rates and a slowdown in global trade pressured revenue at Deutsche's other divisions, such as those for corporate and retail clients, though asset management revenue rose 23%. – Rappler.com

$1 = 0.8282 euros