Deutsche Bank to report net income above market expectations

Maria Nikolova

Deutsche Bank expects to report group profit before tax of EUR 206 million and net income of EUR 66 million, above market expectations.

Deutsche Bank has published an ad-hoc release only three days before the publication of its Q1 results. The bank explains that the management is seeking to address uncertainties around market expectations on the bank’s earnings and media reports on a loss in the quarter. Furthermore, it is possible that the bank will fall modestly and temporarily below its previous CET 1 target of at least 12.5% and the fully-loaded leverage ratio target of 4.5% by the end of 2020.

Deutsche Bank expects to report group pre-tex profit before of EUR 206 million and net income of EUR 66 million, ahead of market expectations. The bank explains that its profit before tax in the first quarter is a result of growth in revenues in its core businesses, together with continued progress on reducing adjusted costs.

Revenues are expected to be EUR 6.4 billion with noninterest expenses of EUR 5.6 billion, including contributions to the Single Resolution Fund of EUR 0.5 billion. Provisions for credit losses are expected to be EUR 0.5 billion, or 44 basis points of loans. Consensus estimates showed a wide range around each of these results.

Deutsche Bank’s Common Equity Tier 1 (CET1) ratio was 12.8% at quarter end, down from 13.6% at year end. The decline in the CET1 ratio in the quarter included approximately a 30 basis points negative impact from the revised securitization framework as expected, and approximately 40 basis points of items precipitated by the COVID-19 pandemic.

In anticipation of business opportunities and elevated client demand and in light of the current macroeconomic environment, Deutsche Bank is reviewing its 2020 CET1 and leverage ratio targets. Management has made the clear decision to allow capital to fall modestly and temporarily below its target in order to support clients and the broader economy during the economic crisis.

The Management Board has not changed further financial targets. The bank reaffirmed its other financial targets, which are:

  • Adjusted costs excluding transformation charges, and impact of the transfer of its Prime Finance platform to BNP Paribus of €19.5 billion at the end of 2020 and €17 billion at the end of 2022;
  • A post-tax return on tangible equity of 8% at the end of 2022.

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