Deutsche Bank records net profit of EUR 61m in Q2 2020

Maria Nikolova

Deutsche Bank reiterated its guidance for full year 2020 provision for credit losses of between 35-45 basis points of loans.

Deutsche Bank AG (ETR:DBK) has just posted its financial results for the second quarter of 2020, with revenue and profit growing.

Core Bank revenue growth, combined with continued progress on cost reduction, was sufficient to offset a rise in provision for credit losses to EUR 761 million in the quarter, in line with management expectations and driven primarily by the impact of the COVID-19 pandemic.

Pre-tax profit for the quarter to end-June 2020 amounted to EUR 158 million, after transformation- related effects of EUR 280 million and EUR 24 million of bank levy charges. This compares with a pre-tax loss of EUR 946 million in the second quarter of 2019 which included goodwill impairments and other transformation-related effects.

Net profit was EUR 61 million in the second quarter of 2020. This contrasted to a net loss of EUR 3.1 billion in the prior year quarter which included transformation-related effects of EUR 3.4 billion, predominantly comprising Deferred Tax Asset (DTA) valuation adjustments, goodwill impairments and software impairments. Current quarter results include transformation related effects of EUR 310 million.

For the first six months of 2020, pre-tax profit was EUR 364 million, versus a pre-tax loss of EUR 654 million in the prior year period. Net profit for the first half of 2020 was EUR 126 million, versus a net loss of EUR 2.9 billion in the prior year which was primarily due to the aforementioned transformation-related effects.

Provision for credit losses was EUR 761 million in the second quarter of 2020, 69 basis points (annualised) of loans, up from EUR 506 million and 44 basis points (annualised) of loans in the first quarter of 2020. This was in line with management expectations and reflects the weaker macro-economic outlook relative to March 31, 2020, a management overlay to account for uncertainties in the outlook as well as downgrades to client credit ratings.

Deutsche Bank reiterated its guidance for full year 2020 provision for credit losses of between 35-45 basis points of loans.

The CET1 ratio was 13.3% at the end of the quarter, up from 12.8% in the first quarter of 2020. The quarter-on-quarter increase of 42 basis points was driven by several factors, including the net impact of COVID-19 related effects, such as the repayment of credit facilities by customers; the benefit of the accelerated implementation of the EU’s ‘Quick Fix’ to Capital Requirement Regulation 2 (CRR2); and further de-risking by the Capital Release Unit during the quarter.

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