Deutsche Bank to beat Q1 profit expectations; capital targets under review

Deutsche Bank is to review its 2020 capital targets following the coronavirus outbreak, the German lender confirmed on Sunday, as it announced first-quarter results would significantly beat expectations.

In an unscheduled update posted in the evening, Deutsche said quarterly net income was likely to come in at €66m on revenues of €6.4bn. Analysts had been expecting a first-quarter loss on revenues of around €5.7bn. Pre-tax profit is expected to be €206m, also above market expectations.

Although Germany’s biggest lender did not specify what was behind the improved numbers, it is thought that in common with a number of rivals, Deutsche has benefited from a surge in trading during the quarter. The Covid-19 pandemic has caused widespread turmoil and significant price swings across global markets.

However, the bank said provisions for credit losses during the quarter were likely to be €500m, around three times higher than the same period a year earlier.

Deutsche also said that its Common Equity Tier 1 (CET1) ratio had declined to 12.8% at the quarter end compared to 13.6% at the year end, although it remains comfortably above regulatory requirements of 10.4%. In January, the European Central Bank lowered the requirement from 11.6% in response to the coronavirus outbreak.

Looking forward, Deutsche said it was reviewing its 2020 CET1 and leverage ratio targets.

It was "possible", the bank said, that its CET1 ratio would fall "modestly and temporarily" below its target of at least 12.5%.

"The short-term implications of the Covid-19 pandemic make it difficult for the bank to accurately reflect the timing and the magnitude of changes to its original capital plan. Deutsche Bank’s priority is to stand by its clients without compromising on capital strength," it said.

The bank also warned it was unlikely to reach its 2020 fully-loaded leverage ratio target of 4.5%.

All other targets for 2020 were reaffirmed, however.

Christian Sewing, chief executive, told Reuters: "We are firmly committed to mobilising our balance sheet to support our clients, who need us now even more."

Deutsche Bank is currently in the middle of a strategic turnaround plan, which includes axing around 18,000 job by 2022. It is currently not clear what impact the Covid-19 pandemic will have on the programme.

As at 1030 BST, shares in Deutsche were trading 12% higher.

The first quarter results are due to be released on Wednesday.