Deutsche Bank reported its seventh consecutive quarterly profit on Wednesday, but warned that the current environment is “challenging” and “cost pressures have intensified.”
The German lender said net profit reached 1.06 billion euros ($1.13 billion) in the first quarter of the year. Analysts had forecast a figure of 1.01 billion euros for the three-month period, according to Refinitiv data.
“Deutsche Bank is more stable and resilient than it has been for many years. Our first-quarter figures clearly show that,” CEO Christian Sewing said in a letter to staff on Wednesday. But the German bank noted in its earnings report that the outlook for this year was challenging.
“Despite the uncertainties associated with the war in Ukraine and the remaining challenges associated with the COVID-19 pandemic, we intend to continue executing our strategy in a disciplined manner, focusing on improving sustainable profitability by increasing revenue in our Core Bank while remaining disciplined on costs and capital, however, the current environment is increasingly challenging and cost pressures have intensified,” the bank said.
Rising inflation and how central banks might react to it has rattled markets recently and caused a lot of uncertainty for businesses, including banks. A sudden change in monetary policy could affect the performance of banks.
‘A wall of worries’
James von Moltke, chief financial officer of Deutsche Bank, told CNBC’s Annette Weisbach: “It’s a wall of worry right now.”
“There are a number of different features and of course the war in Ukraine dominates because it dominates the news, but it shouldn’t overshadow that there are still some pressures on supply chains, the Chinese reaction to covid and other features,” he said. saying.
Other highlights of the quarter:
- Revenue was up 1% from a year earlier to €7.33 billion.
- The provision for credit losses stood at €292 million, compared to €69 million a year ago.
- The CET 1 capital ratio, a measure of bank solvency, stood at 12.8% from 13.7% a year ago.
All of Deutsche Bank’s divisions posted better results than a year ago. In investment banking, fixed income and foreign exchange reported higher revenues by 15%.
Commenting on the results, von Moltke added that “these trends are likely to continue in the second quarter.”
“There is still uncertainty in the financial markets and some volatility, our goal is to support our clients in this environment,” he said.
Exposure to Russia
On March 11, Deutsche Bank said it would shut down its operations in Russia, a major U-turn from its initial stance when war broke out in Ukraine. The German bank said it was joining a number of international peers in leaving the country in response to its invasion of Ukraine and resulting operating restrictions.
As such, Deutsche Bank said it reduced its exposure to Russia during the first quarter. Gross credit exposure decreased 5% to €1.3 billion and net credit exposure decreased 21% to €500 million during the quarter. He also said he is “implementing without reservation” Western sanctions against Russia.
The German lender surprised the markets at the end of 2021 with a profit of 145 million euros when investors had estimated a net loss for the last quarter of the year. The shares are down 6.6% since the beginning of the year.