Deutsche Bank logs 11th consecutive quarterly profit, reveals cutbacks

A Deutsche Bank AG branch in the financial district of Frankfurt, Germany, on Friday 6 May 2022.

Alex Kraus | Bloomberg | Getty Images

Deutsche Bank on Thursday reported a net profit of 1.158 billion euros ($1.28 billion) for the first quarter, following a turbulent month that saw it sweep away market fears of a global banking crisis.

Net profit attributable to shareholders was comfortably above a consensus forecast of 864.54 million euros produced by a Reuters poll of analysts, and up from 1.06 billion euros for the first quarter of 2022.

This marked an 11th consecutive quarter of profit for the German lender following the completion of a comprehensive restructuring plan that began in 2019 aimed at cutting costs and improving profitability.

“Our results for the first quarter demonstrate the relevance of our global Hausbank strategy for our customers and underline that we are well on our way to meeting or exceeding our 2025 targets,” said CEO Christian Sewing.

“We aim to accelerate the execution of our strategy through a series of actions announced today: increasing our ambitions for operational efficiency, increasing capital efficiency to drive returns and support shareholder distributions, and seizing opportunities to exceed our revenue growth targets.”

Deutsche’s corporate bank net income came in at 2 billion for the quarter, up 35% year-on-year and the highest quarterly figure since the launch of the transformation program. Net interest income was the main driver, growing by 71%.

However, the bank has also marked cuts to non-client-facing staff and reported a steeper-than-expected 19% year-on-year drop in investment banking revenue year-on-year.

“The bank is currently implementing further efficiency measures across the front office and infrastructure,” the report states.

“These include strict hiring restrictions in non-customer facing areas, focused reductions in management teams, streamlining of the mortgage platform and further downsizing of the technology center in Russia.”

The pace of earnings expectations follows a net result of 1.8 billion euros for the last quarter of 2022, which far exceeded expectations and brought the bank’s annual net income to 5 billion euros. However, uncertainty about the macroeconomic outlook, along with weaker-than-expected investment banking results, kept traders cautious about the company’s shares.

The market turmoil triggered by the collapse of US-based Silicon Valley Bank in early March, which ultimately resulted in the emergency rescue of Credit Suisse by UBS, engulfed Deutsche Bank cards late last month despite its strong financial position.

The Frankfurt-listed stock fell, while credit default swaps – a form of insurance for a company’s bondholders against default – rose sharply, prompting German Chancellor Olaf Scholz to publicly allay market concerns.

Other data highlights for the quarter:

• Revenue came in at 7.7 billion euros, up from 7.33 billion euros in the first quarter of 2022, despite what the bank called “challenging conditions in financial markets” during the quarter.
• The provision for credit losses was 372 million euros, compared with 292 million euros a year ago.
• CET 1 capital adequacy, a measure of banks’ solvency, was 13.6%, up from 12.8% a year ago, 13.4% last quarter.