beat expectations by closing last year with another quarterly profit following a boom in activity at its investment banking unit.
The results come at a key time for the lender after it promised investors it would remake itself following years of disappointing results and legal troubles. While the coronavirus pandemic had at first slowed cost-cutting at the bank—a key element of its revamp—it reported a 21% drop in expenses in the quarter, beating analysts’ estimates.
“We have built firm foundations for sustainable profitability, and are confident that this overall positive trend will continue in 2021, despite these challenging times,” said Chief Executive Christian Sewing.
Mr. Sewing’s focus on making Deutsche Bank leaner puts it ahead of its European peers, which have stepped up their own cost-cutting efforts after it became clear the pandemic would dent profits. Last week,
Commerzbank AG
said it planned to cut one in every three jobs in the country through 2024. Banks across Europe are also closing branches.
Deutsche Bank’s task going forward is to stay profitable as trading activity normalizes at its investment bank, while its corporate and lending businesses struggle to grow.
The investment bank unit reported €1.89 billion in revenue, equivalent to $2.27 billion, for the quarter, up 24% from a year ago. Revenue at its corporate bank unit, which caters to clients like midsize German companies, and its retail banking unit, dropped slightly.
Deutsche Bank posted a €189 million profit for the quarter, swinging from a €1.48 billion loss it reported a year ago when it was hit by restructuring charges. It beat analysts’ estimate of a €168 million loss.
For the year, the bank made a €624 million profit, swinging from a €5.27 billion loss in 2019.
Deutsche Bank set aside €251 million in the last three months of the year to cover bad loans, bringing the total to €1.79 billion. The figure was lower than analysts had expected.
Although Germany’s economy has performed better than many of its peers during the pandemic, largely thanks to generous government support measures, it still contracted by 5% in 2020. The country is currently under a second lockdown.
Andrea Enria,
head of banking supervision at the European Central Bank, last week expressed concerns that banks in the eurozone aren’t properly evaluating the impact of the pandemic on the financial health of borrowers. He warned that it could result in a sudden cascade of defaults.
Deutsche Bank’s chief risk officer in November said bad loans on its books were well contained because of its high exposure to low-risk German mortgage borrowers and low exposure to sectors most impacted by the crisis.
In the U.S., several banks have released billions of dollars they had set aside to cover soured loans on signs the economy has held up better than previously expected.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com
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