Deutsche Bank posts stronger than expected quarterly profit but warns on capital target

on Apr 27, 2020
Updated: Apr 28, 2020
  • Deutsche Bank records stronger than expected profit in Q1 on upbeat trading results.
  • The financial services company set aside £436 million in provisions for credit losses.
  • The investment bank says it is likely to fall short of its CET 1 and leverage ratio targets in 2020.

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Deutsche Bank (ETR: DBK) reported a stronger than expected quarterly profit on Sunday. The bank, however, said that it is likely to fall short of its 2020 capital target due to the Coronavirus driven hike in defaults this year. The German bank also announced to have set aside £436 million for credit provisions.

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The global multinational investment bank expects to print £57.57 million in net quarterly income. In terms of revenue, it anticipated £5.58 billion in the recent quarter. Deutsche Bank’s provisions for credit losses registered over 3 times higher as compared to last year.

The bank is scheduled to release its detailed financial results on Wednesday.

Deutsche Bank’s Revenue Boosts On Upbeat Trading Results

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Analysts, on the other hand, had anticipated the bank to post £4.97 billion in revenue and swing to a net loss in Q1. Much like its competitors, however, Deutsche Bank also got a revenue boost from upbeat trading results in the recent quarter.

Deutsche was reported around 8.3% up in premarket trading on Monday.

The financial services company has been committed to restructuring in the past months. But some of its investors and executives are concerned about the potential impact of COVID-19 on such efforts. The bank’s CEO Christian Sewing commented on Sunday:

“We are firmly committed to mobilising our balance sheet to support our clients, who need us now even more.”

According to Germany’s largest lender, it may miss its CET 1 (common equity tier 1) target this year. Originally, the company had targeted a minimum of 12.5% CET 1 in 2020. At the end of Q1, the CET 1 ratio was noted at 12.8% versus 13.6% that was reported at the end of last year. The German bank is also likely to fall short of its target of 4.5% leverage ratio (fully-loaded) in 2020.

Deutsche Bank posted a £4.97 billion loss in 2019

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Deutsche, however, maintained its remaining financial targets for 2020 including £17 billion in adjusted costs excluding reimbursable expenses and transformation charges. The bank has struggled to get rid of losses in the past years. In 2019, it recorded a £4.97 billion loss that marked its 5th in a row.

At £5.34 per share, Deutsche is currently over 15% down year to date in the stock market. It recorded an annual loss of around 15% in 2019 as well.

At the time of writing, Deutsche bank is valued at £10.97 billion.

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