Deutsche Bank expects revenue dip as trading slows

Germany’s largest lender posted its first annual profit in six years in 2020

Deutsche Bank's chief executive Christian Sewing is looking to focus more on growth after two years of deep cost cuts. Reuters

Deutsche Bank expects revenue to decline “marginally” this year as a trading boom in the wake of the pandemic weakens before growth resumes next year.

Germany’s largest lender predicts that revenue in the investment bank will decline as volatility normalises, it said in its annual report published on Friday.

Higher volumes and fees in the corporate and private bank will be offset by rate headwinds, while the asset management unit is expected to see “slightly higher” revenues.

Almost half-way into a deep restructuring of Deutsche Bank, chief executive Christian Sewing is looking to focus more on growth after two years of deep cost cuts.

He got an unexpected boost when the pandemic revived securities trading that had languished for years, helping him to maintain goals that many analysts had viewed as too ambitious. But the trading rally left him reliant on a unit he cut back, while the lending businesses at the centre of his turnaround struggles with negative interest rates.

“We had a strong start to 2021,” Mr Sewing said. “However, we continue to expect investment bank revenues to decline year-on-year as industry volumes and volatility normalise from very high levels of activity in 2020.”

The bank said previously it expects to be profitable again this year. It posted its first annual profit in six years in 2020, driven by the investment bank.

To retain top performers in the business, the unit saw an increase in its bonus pool of 46 per cent, compared with a rise in variable compensation of 29 per cent for the bank as a whole, to about $2.3 billion.

Deutsche Bank initially planned to expand the entire pool by a third but had to scale back the plan after objections from the European Central Bank, Bloomberg News has reported.

The bonus increase “balanced Deutsche Bank’s significantly improved financial performance, delivery against published targets and retention of top talent with the goal of maintaining capital strength,” it said.

Analysts expect Deutsche Bank’s revenue to fall to $27.3bn this year while they anticipate an increase in net income to about $953.7 million, according to the average forecast compiled by Bloomberg. Mr Sewing has set a target of about $29bn in 2022 revenue, compared with $28.6bn last year.