The Best Quarter of Deutsche Bank AG in 7 Years

Deutsche Bank AG management revised its forecasts for the better after reporting for the first quarter.

Despite previous assumptions about a slowdown in gains, the bank received a 34% increase in profits from the purchase and sale of debt securities. This is 2 times the average growth of competitors from the United States.

The CEO’s two-year recovery plan is working well thanks to strong investor interest in bonds and hedging. It was these actions that caused favorable changes in the investment bank. Interest rate rebound and credit earnings rating will be closely tied to the period of steady growth in asset prices on the market and its end. Since Deutsche Bank shares have surged this year’s profit is up to 20%.

Expected to rise to €18.9 billion

Chief Financial Officer James von Moltke noted that the current activity is encouraging, but the same growth is not expected in the coming months through June. He also said that it would not be possible to cut costs to the desired €18.5 billion, but while it is expected to rise to €18.9 billion, no compensation is foreseen as this could endanger the necessary investments.

Despite the positive reaction, analysts warned that aid from the trading market is expected to finish soon. Also, an analyst at Citigroup Inc. Andrew Coombs supposes that the bank will not be able to achieve an 8% return on equity next year, even though he mentioned that the company should be praised for such results in the quarter.

Deutsche Bank AG

€908 million ($1.1 billion) is the company’s highest net profit in the last 7 years since 2014.

Also, thanks to improved economic forecasts, the bank was able to use lower resources to cover credit losses. 32% of the investment bank’s income left behind almost all of its “colleagues” on Wall Street, with the exception of Morgan Stanley.

1Q 2021 ACTUAL 1Q 2021 ESTIMATE 1Q 2020 ACTUAL
Group revenue 7,233 6,580 6,350
Credit provisions 69 195 506
Trading revenue 2,478 2,000 1,854
Net income attributable to shareholders 908 528 -43
CET1 ratio 13.7% 13.3% 12.8%

Kian Abouhossein and Amit Ranjan, analysts at JPMorgan Chase & Co., reported that Deutsche Bank is offering better results than could be expected across all divisions and among many global investment banks. If you compare the revenue of a corporate and a private bank, you will notice that last year, the first one decreased by 1 percent but increased by 2% (taking into account currency swings), and the second one increased by 2% (currency swings did not affect).

Deutsche Bank was a creditor to the Bill Hwang’s family office and had some influence over Archegos. During the interview, Von Moltke said happily that the bank was able to recover the excess collateral and did not suffer losses.

Archegos has caused losses to many financial institutions. These include Swiss and Japanese companies, but Deutsche Bank has received support thanks to significant SPAC business.

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