Deutsche CEO 'can see the momentum' and expects growth in 2022 revenues

After its most profitable year in a decade, Deutsche Bank AG is on course to replicate its 2021 revenue level this year or even exceed it, according to CEO Christian Sewing.

Germany's largest bank by assets yielded a 2021 net profit of €2.51 billion, a more-than-fourfold increase from the €624 million booked in 2020 and its highest annual result since 2011. Sewing, speaking to analysts on an earnings conference call, attributed the increase to the bank's franchise, which he said "has done more than prove its resilience" and gone beyond expectations since the current strategy's launch in 2019.

Full-year 2021 net revenues reached €25.41 billion, up 5.7% from €24.03 billion in 2020.

"[The] revenue momentum is ... healthy and sustainable," the CEO said, estimating that revenues will hit about €25.7 billion in 2022. "I can see the pipeline; I can see the momentum."

Transformation charges

The bank's profit comes despite booking €1 billion of transformation charges in 2021, plus some €500 million of restructuring and severance charges, Sewing said. This means that Deutsche Bank has now recognized 97% of its expected transformation-related expenses.

The transformation will help drive expenses down in succeeding quarter and years, said Sewing, adding that further cost-saving efforts give the bank confidence that it is on course to reach its 70% cost-to-income ratio for 2022.

Analysts at JPMorgan said Deutsche Bank "is going in the right direction," noting in a Jan. 27 report that the focus for 2022 is meeting the cost-to-income ratio goal. JPMorgan has an "overweight" rating on Deutsche.

The bank's shares were trading up more than 3% at 4:48 p.m. Frankfurt time on Jan. 27.

The investment banking division yielded net revenues of €9.63 billion, despite an expected normalization in trading, beating the €9.29 billion booked in 2020, a year marked by market volatility. Investment bank head Mark Fedorcik has said the business had a "muted" start to the third quarter of 2021, but registered "robust activity" in its financing and origination and advisory business.

Management also addressed the impact ratings actions, including a rating upgrade by S&P Global Ratings in November 2021, on the bank's operation. CFO James von Moltke said a triple-digit-million amount of revenue left the bank when it received downgrades in the past, concentrated in the markets business.

"[Analytically], we'd expect all of that to come back. That's an annual number that gives you some sense of the uplift potential from that," von Moltke said.

Room for growth beyond the i-bank

Earlier in the day at a media conference, Sewing rejected criticism that Deutsche Bank is still too reliant on its investment bank.

"I don't subscribe to that," he said. "We see excellent growth opportunities for our private bank, our corporate bank and our asset management [business]."

Asset management revenues grew year over year to €2.71 billion from €2.23 billion, as did those in the private bank, to €8.23 billion from €8.13 billion. Meanwhile, the corporate bank yielded virtually flat revenues of €5.15 billion.

For 2022, the final year of the Sewing transformation, the bank targets a return on tangible equity of 8%. An investor day will take place on March 10.

The bank is planning up to €700 million of capital distributions, including a cash dividend of 20 cents per share and €300 million of share buybacks. These mark the first step toward the bank's promise to return €5 billion of capital to shareholders over time, it said.