Germany: Engine of Europe

Deutsche Bank reports its best quarterly profit for seven years

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Key Points
  • Germany's largest lender followed in the footsteps of many of its Wall Street rivals in posting a substantial earnings beat.
  • The bank also avoided the fallout from collapsed U.S. hedge fund Archegos Capital which saw UBS, Credit Suisse and several others take significant hits in the first quarter.
  • The strong report sent Deutsche Bank shares more than 9% higher by afternoon trading in Europe on Wednesday.
VIDEO4:5804:58
Deutsche Bank CFO sees 'encouraging' 2021 as the bank posts a first-quarter earnings beat

LONDON — Deutsche Bank on Wednesday reported a 908 million euro ($1.1 billion) profit for the first quarter, buoyed by continued strong performance in its investment banking division.

The bank vastly exceeded analyst expectations for net income of 642.95 million euros, according to Refinitiv, and showed a marked improvement from the 51 million euro profit eked out in the fourth quarter of 2020.

Here are the other highlights:

  • Total first-quarter net revenues were 7.2 billion euros, compared to 6.35 billion euros for the same period in 2020.
  • Common equity tier 1 (CET1) ratio — a measure of bank solvency —  came in at 13.7%, compared to 12.8% for the first quarter of 2020.
  • First-quarter loan loss provisions were 69 million, down 86% from the 506 million in the first quarter of 2020.
  • Return on tangible equity (RoTE) hit 7.4%, up from 3% in the same three months of last year.

Germany's largest lender followed in the footsteps of many of its Wall Street rivals in posting a substantial earnings beat, with Goldman Sachs, JPMorgan and Morgan Stanley all smashing through first-quarter expectations in recent weeks.

The strong report sent Deutsche Bank shares more than 9% higher by afternoon trading in Europe on Wednesday.

Investment bank revenues came in at 3.1 billion euros, up 32% year-on-year, while profit before tax soared 134% to 1.5 billion euros.

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Rising inflation could be a risk for 2021, Deutsche Bank CFO says

While the investment bank and asset management unit, where revenues grew 23% year-on-year, were the key drivers of earnings growth, CFO James von Moltke told CNBC on Wednesday that Deutsche Bank was also pleased with its corporate and private bank performance.

"We have talked about how those businesses are still fighting through the headwinds of negative interest rates, but that we are seeing underlying growth in them more than offsetting, or offsetting at least, the interest rate headwinds," von Moltke told CNBC's Annette Weisbach.

The investment bank performance was driven largely by a 34% climb in revenues in the fixed income and currencies (FIC) division to 2.5 billion euros, buoyed by strong year-on-year growth in the credit market.

"The credit business year-on-year of course was very strong, and so you had some mark-to-market losses in the environment that we had last year and a pretty strong environment for credit this year," von Moltke said.

"What I call the macro products of FX, rates and emerging markets, we have seen some more normalization through the course of the first quarter."

Von Moltke added that while the normalization of the macro themes that had been driving investment bank growth had continued into the second quarter, the overall environment was still "reasonably encouraging."

The bank also avoided the fallout from collapsed U.S. hedge fund Archegos Capital which saw UBS, Credit Suisse and several others take significant hits in the first quarter.

The bank has embarked on a mass restructure of its business over the past two years, the cost of which had weighed on earnings alongside elevated credit provisions. However, Deutsche swung back to profit in 2020, reporting full-year net profit of 113 million euros.

VIDEO11:1611:16
Watch CNBC's full interview with Deutsche Bank CFO James von Moltke on the lender's first quarter