Deutsche Bank swings to full-year profit after tepid Q4

FRANKFURT — Deutsche Bank returned to profit in 2018, its first in four years, despite a greater-than-expected loss in the fourth quarter, the German lender said on Friday.

Deutsche Bank has been trying to turn itself around under a new leadership, but has faced continuous hurdles, including allegations of money laundering, ratings downgrades and failed stress tests.

The bank has also turned into a subject of rampant merger speculation, and Friday's earnings figures underscore that the lender still has a long way ahead to post a sustainable profit. 

The fourth-quarter net loss of 409 million euros ($467.73 million) at Germany's flagship lender was greater than the 268 million euros expected on average by analysts, according to a consensus report on the bank's website.

The quarter was marked by continued weakness in its key trading business. Revenue at its cash-cow bond-trading division plunged 23 per cent. 

For the investment bank as a whole, revenue dropped 5 per cent in the fourth quarter.

However, Deutsche posted a full-year profit of 341 million euros, compared with a net loss of 735 million euros in 2017.

"Our return to profitability shows that Deutsche Bank is on the right track," Chief Executive Christian Sewing said on Friday.

The company's return to profit in 2018 is a huge achievement for Sewing, who took over in April 2018 and has embarked on plans to cut more than 7,000 jobs in an overhaul of the bank. 

"In 2019, we aim not only to save costs but also to make focused investments in growth. We aim to grow profitability substantially through the current year and beyond," he said.

The bank's shares lost more than half their value in 2018, though they have recovered slightly over the past month.

However, time is running out for Deutsche Bank to turn around on its own, making a merger with rival Commerzbank more likely, two people with knowledge of the matter said on Thursday.

A major investor is awaiting market reaction to both banks' earnings over the next couple of weeks before deciding on the need for a merger, said a person close to the investor.

Speculation of a merger between the two has heightened under the tenure of Finance Minister Olaf Scholz, who has spoken in favour of strong banks. His team has met frequently with executives of Deutsche, Commerzbank and major shareholders.

Deutsche is considered one of the most important banks for the global financial system, along with JPMorgan Chase, Bank of America and Citigroup.

But the German lender has been plagued by losses and a scandal.

 A $7.2 billion US fine in 2017 for its role in the mortgage market crisis was a major blow that spooked clients.