A branch of Deutsche Bank AG in the financial district of Frankfurt, Germany, Friday, May 6, 2022.
Alex Kraus | Bloomberg | Getty Images
German Bank reported net profit of 1.158 billion euros ($1.28 billion) for the first quarter on Thursday, coming off a turbulent month that saw it swept away by market fears of a global banking crisis.
Net profit attributable to shareholders was well above a consensus forecast of 864.54 million euros produced by a Reuters analyst poll, and up from 1.06 billion euros for the first quarter 2022.
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It is an 11th consecutive quarter of profits for the German lender after completing a major restructuring plan which began in 2019 in a bid to cut costs and improve profitability.
“Our first quarter results demonstrate the relevance of our Global Hausbank strategy for our clients and underscore that we are on track to meet or exceed our 2025 targets,” said CEO Christian Sewing.
“We aim to accelerate the execution of our strategy through a number of measures announced today: raising our ambitions for operational efficiency, strengthening capital efficiency to generate returns and supporting distributions to shareholders, and seize opportunities to outperform our revenue growth targets.”
Deutsche’s corporate banking net revenue was $2 billion for the quarter, up 35% year-on-year and the highest quarterly figure since the launch of its transformation program. Net interest income was the main driver, increasing by 71%.
However, the bank also reported job cuts for non-client-facing staff and announced a stronger-than-expected 19% year-over-year drop in investment banking revenue.
“The bank is currently implementing additional efficiency measures across the front office and infrastructure,” the report said.
“These include strict limitations on hiring in non-customer-facing areas, targeted reductions in management levels, streamlining of the mortgage platform and further downsizing of the technology center in Russia. “
The earnings beater follows a net profit of 1.8 billion euros for the last quarter of 2022, which far exceeded expectations and lifted the bank’s annual net profit to 5 billion euros. . However, uncertainty surrounding the macro outlook, along with weaker-than-expected performance by investment banks, prompted traders to remain cautious about the company’s stock.
The market turmoil caused by the collapse of the US-based Silicon Valley Bank in early March, which ultimately resulted in the emergency bailout of Swiss credit by UBSbriefly engulfed Deutsche Bank late last month despite its strong financial position.
Its Frankfurt-listed stock fell, while credit default swaps – a form of insurance for a company’s bondholders against its default – soared, prompting German Chancellor Olaf Scholz to publicly dismiss market concerns.
Other data highlights for the quarter:
- Revenue was 7.7 billion euros, compared to 7.33 billion euros in the first quarter of 2022, despite what the bank described as “challenging financial market conditions” during the quarter.
- The provision for credit losses amounted to 372 million euros, compared to 292 million euros a year ago.
- The CET 1 capital ratio, a measure of bank solvency, stood at 13.6%, down from 12.8% a year ago and 13.4% in the previous quarter.