A transformation programme for the private bank has pushed results into the red although adjusted figures show a profit. The loss narrowed sharply in 2020. Overall, group results showed a sharp improvement in 2020, shrugging off the pandemic's impact.

Deutsche Bank today said that its private banking arm’s pre-tax loss for 2020 narrowed to €124 million ($148.9 million) from €279 million a year earlier, as this part of the group remained in the red as a result of transformation-related costs. Adjusted profit before tax stood at €493 million, down by 3 per cent on a year ago.

There were €642 million of transformation-linked effects on the results, Germany’s largest banking group said in a statement today.

For the full year, net private banking revenues were €8.1 billion, down by 1 per cent compared with 2019. Revenues excluding specific items remained stable compared with the prior year, as sustained business growth from net inflows of investment products, net new client loans and repricing measures offset significant interest rate headwinds and the impact of COVID-19.

Non-interest costs fell by 7 per cent year-on-year to €7.5 billion, while adjusted costs ex-transformation charges fell by 6 per cent, primarily reflecting cost reduction initiatives and synergies from efficiency measures as the private bank reduced its workforce to below 30,000 full-time equivalents at year end. 

Higher transformation-related effects and litigation charges largely offset the non-recurrence of a goodwill impairment of €545 million in 2019.

The pandemic forced the bank to push up provision for credit losses, which reached €711 million in 2020, up from €344 million in 2019. The 2019 figures included higher positive effects from portfolio sales and methodology changes, the bank said.

Total assets under management in the private bank rose by 2 per cent year-on-year to €493 billion.

In the fourth-quarter, profit before tax was €9 million compared with a loss before tax of €261 million a year earlier. Adjusted profit before tax was €216 million, up more than three-fold year-on-year.

Germany and international business
The Private Bank Germany business achieved net revenues of €1.2 billion in the quarter, up slightly year-on-year excluding a negative impact from Deutsche’s sale of Postbank Systems. Growth in loan revenues and higher commission and fee income from investment and insurance products more than offset the impacts of deposit margin compression.

In the International Private Bank, net revenues were €791 million, up by 2 per cent year-on-year, or down by 4 per cent when stripping out the effect of a higher contribution from Sal Oppenheim workout activities, due to currency translation effects. (This refers to the purchase several years ago of Germany’s Sal Oppenheim business.) Headwinds from lower interest rates and COVID-19 were partly offset by business growth, due in part to relationship managers hired in earlier periods.

Group results
For the Frankfurt-listed group as a whole, Deutsche said it logged a full-year 2020 profit of €624 million, with profit before tax of €1.0 billion euros, versus a loss of €5.3 billion, and a loss before tax of €2.6 billion in 2019.

Non-interest costs fell by 15 per cent to €21.2 billion in 2020.

“In the most important year of our transformation, we were able to more than offset transformation-related effects and elevated credit provisions – despite the global pandemic. With profit before tax of a billion euros, we’re ahead of our own expectations. We have built firm foundations for sustainable profitability, and are confident that this overall positive trend will continue in 2021, despite these challenging times,” Christian Sewing, group CEO, said.

The bank had a Common Equity Tier 1 ratio of 13.6 per cent at the end of 2020.