After years of scandals and penalties, an upswing in securities trading and dealmaking has helped Deutsche Bank become profitable again, despite its plan to steer away from its volatile investment business.
Higher interest rates are boosting profits from regular banking as M&A deals have fallen, according to Reuters.
"We do not expect that the majority of the bank's growth between now and 2025 will come from investment banking," Board Member Fabrizio Campelli told Reuters.
In 2019, when the bank was leaving equities trading, the plan was for a shift toward corporate and retail banking, with the investment bank making up 30% of revenues at key divisions. A year later, when the pandemic’s arrival caused market volatility, the bank’s bond trading business flourished and became its largest generator of revenue. In 2021, global dealmaking enhanced it even more. In 2020 and 2021, the investment bank made close to 40% of revenue and more than 75% of pre-tax profit.
All this was occurring while the corporate and retail divisions remained flat under enduring low-interest rates.
"It would have been better if the stable areas had grown more than the investment bank," Andreas Thomae, a Portfolio Manager at Deutsche investor Deka, told Reuters. "Overall, however, the bank is on track to earn good money on a sustainable basis. Now the stable areas have to take on a greater role again in the future."
The non-investment bank businesses showed “good momentum” in mid-December and “upside potential” for the shares, which are down 10% this year, according to UBS.
After experiencing losses estimated at €6 billion over ten years, the bank embarked in 2019 on a $9.59 billion program for turning itself around by the end of 2022. It has achieved or exceeded some of its targets, the bank reports, racking up nine consecutive profitable quarters.
"When I took over in 2018, we knew that we were in dire straits," Chief Executive Officer Christian Sewing said at a conference in November. "We knew that things had to change."
