Deutsche Bank with a strong tailwind

Booming business in the financial markets and significantly fewer bankruptcies than feared gave Deutsche Bank its best result in seven years in the first quarter.

Deutsche Bank, which had been plagued by scandals, falling revenues and high risks in previous years, made strong profits again at the start of the current year. Bubbling income in investment banking and a sharp decline in risk provisioning have brought the bank a surplus of 908 million euros – after a loss of 43 million in the previous year. Industry observers had expected a significant increase, but the actual numbers far exceeded expectations. The main driver was business in the capital markets, investment banking, where Deutsche Bank is one of the most important bond and currency traders in the world. Income in this area rose by a third to 2.5 billion euros. The bank was also able to score in the consulting and IPO business. With a pre-tax profit of 1.5 billion euros, more than twice as much as in the previous year, investment banking once again proved to be by far the bank’s most profitable line of business.

Aimed at eight percent return

At the same time, the group benefited from government aid for the economy. As a result, there were significantly fewer bankruptcies in the first quarter than feared, so that the bank was able to reduce its risk provision for bad loans to 69 million euros, after 506 million in the first quarter of the previous year. Overall, the money house has succeeded in increasing income while at the same time costs have continued to fall. “These results reinforce our expectation that we will achieve our goals for 2022,” said bank chief Christian Sewing. The aim is to increase the return on equity after taxes to eight percent. With 7.4 percent in the first quarter, it has come very close.

Confidence despite ongoing pressures

Inspired by the good numbers, Sewing was more confident in the morning for the year as a whole. “Not only can we look back on an excellent quarter, the outlook is also optimistic,” he wrote in a letter to the group’s almost 85,000 employees. The consequences of the low interest rates gradually had less of an impact on income in the retail and corporate banking business. At the same time, there are many indications that a considerable part of the income growth in the investment bank will prove to be sustainable. At the same time, Sewing also promised lower risk provisions for bad loans for the year as a whole. The bank continues to be burdened by the bad bank, which it calls the “unit for releasing capital”. There was a loss of 410 million in the first quarter. Although this is less than in the previous year, there are still loans at risk of default with a volume of 34 billion euros. In the private and corporate customer business, it is also struggling, like its competitors, with the low interest rates in the euro area.