Deutsche Bank’s return to financial health persists into Q3

Deutsche Bank’s return to financial health persists into Q3
The moon shines next to the headquarters of the Deutsche Bank in Frankfurt, Germany, early Sunday, Oct. 4, 2020. (AP)
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Updated 29 October 2020

Deutsche Bank’s return to financial health persists into Q3

Deutsche Bank’s return to financial health persists into Q3
  • Chief financial officer James von Moltke said the government efforts to help businesses bridge the pandemic had helped

FRANKFURT: Deutsche Bank reported its third straight quarterly profit amid continuing government financial help for businesses during the coronavirus pandemic and as revenues rose at its investment bank division.

The bank said it made a profit of €309 million ($363 million) for the July to September period, in sharp contrast to an €832 million loss in the same quarter a year ago when the bank had a large restructuring charge.

CEO Christian Sewing said the bank was continuing to make progress on a long-term restructuring aimed at improving profits by shedding less profitable or riskier lines of business and cutting employee numbers.

“Our more focused business model is paying off and we see a substantial part of our revenue growth as sustainable,” Sewing said in a statement accompanying the earnings release.

Chief financial officer James von Moltke said the government efforts to help businesses bridge the pandemic had helped. 

He said there was “no question it’s been a supportive factor this year, for the economy as well as for the loan book.”

He added that the bank was not seeing “cliff effects” as different support measures expire.

“Will this support be a sufficient bridge... through the pandemic?,” he said on a conference call with journalists. 

“The evidence so far gives cause for optimism.”

Help for businesses has included temporary salary support programs that pay most of workers’ wages so that companies can avoid layoffs, as well as a moratorium in Germany that allowed financially troubled companies to delay filing insolvency proceedings.

Governments have also suspended taxes and increased deficit spending, while the European Central Bank is pouring €1.35 trillion in newly printed money into the economy through regular bond purchases, a step which has helped prevent turmoil on financial markets.

Third-quarter results were boosted by lower losses from the capital release unit aimed at exiting businesses and investments the bank no long considers part of its long-term strategy. 

Revenues at the investment bank unit rose 43 percent to €2.4 billion. Money that had to be set aside to cover loans that are not being repaid increased 56 percent to €273 million in the quarter from the year-ago quarter, but fell from €761 million in the previous quarter.

The bank said it was on target to reach all of its financial and strategic goals included in its restructuring, aimed at exiting a period of low profitability and regulatory and legal issues that cost the bank billions. 

It continued to shed employees, lowering headcount to 87,000 at the end of the July-September quarter from 90,000 a year earlier.


WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence

WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence
Updated 17 January 2021

WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence

WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence
  • For 2021, OPEC forecast global oil demand to increase by 5.9 million bpd

It was a very mixed week, with oil prices remaining relatively steady despite mixed bearish developments. The commodity market is seeing renewed confidence from investors who have pushed oil prices more than 40 percent since the end of October 2020 after a series of coronavirus vaccine breakthroughs, which raised expectations for a sustained recovery in oil consumption.

On the week closing, Brent crude price made the first weekly decline in three weeks when it fell to $55.10 per barrel. The WTI ended the week slightly up at $52.36 per barrel. The Brent crude weekly price drop came amid the highest increase in COVID-19 cases in China in more than 10 months, which have led to isolation measures and weighed on oil market sentiment.

This week bearish news came mostly from China (the largest oil importer) after its crude oil imports slumped to 9.1 million barrels per day (bpd) in December 2020, from 11.1 million bpd in November 2020. That is the lowest oil import level in 27 months.

The US is planning a stimulus package that some hope will revive its economy and help oil market recovery. The US Energy Information Administration (EIA) reported the latest US crude inventories were lower for the fifth straight week, dropping by 3.2 million barrels. The EIA also surprised the market with its pessimistic forecast for US crude oil production to average 11.1 million bpd in 2021, down by 200,000 bpd from the 2020 average production level.

On the other hand, the OPEC monthly oil market report gave an optimistic oil supply outlook for US shale oil in 2021. With oil prices increasing, OPEC expects oil output to recover more in the second half of 2021 but this is very unlikely to hamper OPEC+ efforts to rebalance if oil demand goes to pre-pandemic levels.

The OPEC monthly report shows total commercial oil stocks for the OECD were at 163.1 million barrels above the latest five-year average for November 2020, which is the latest available data.

OPEC left its forecast for world oil demand unchanged, which has declined by 9.8 million bpd to an average of 90 million bpd in 2020. For 2021, OPEC forecast global oil demand to increase by 5.9 million bpd to average 95 million bpd.

OPEC reported mixed results for global refining margins in December 2020, slightly improving in the US but weaker in Europe. The surge in crude oil prices weighed further on Asian refining economics after returning from the autumn peak maintenance season. That contributed to a slight rise in available spare capacity as it awaits the right economic incentives.

OPEC reported US refinery use rates increased in December 2020 to average 79.14 percent while European refinery use averaged 65.32 percent. In selected Asia countries — China, India, Japan, Singapore and South Korea — refinery use rates increased, averaging 89.83 percent in December, corresponding to a throughput of 25.52 million bpd.

• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq