Deutsche Bank reported its highest quarterly profits in almost a decade as its bond traders capitalised on the turmoil in markets but warned that the fallout from the war in Ukraine posed growing risks.
Germany’s largest bank said on Wednesday that net income climbed 18 per cent to €1.2bn in the first three months of the year, surpassing analysts’ expectations and Deutsche Bank’s best performance since 2013.
A 15 per cent jump in fixed-income trading revenues helped drive profits, as the lender bucked the weaker showing from several Wall Street rivals during the quarter.
Deutsche’s corporate and private bank also increased revenue and profit during a quarter dominated by the market fallout from Russia’s invasion of Ukraine, as interest income grew and the bank drove down costs.
Anke Reingen, an analyst with RBC Capital Markets, said that the positive development across all Deutsche’s core divisions, not just the investment bank, “should be taken positively.”
Christian Sewing, Deutsche Bank chief executive, said its first-quarter results showed that “our bank performs particularly well during challenging times”. Profits climbed in the quarter despite a 28 per cent increase in levies the bank contributed to the European bank resolution funds, designed to finance the orderly wind-down of failing banks
However, Sewing warned that the bank was facing growing risks both from the war and a weakening global economy. “The global economic outlook is deteriorating, while inflation rates continue to rise,” he said.
While James von Moltke, chief financial officer, told journalists on a call that the bank was “more and more confident” that it was able to meet its 2022 revenue target of €26bn to €27bn, after €25.4bn last year, its shares fell 4 per cent in morning trading in Frankfurt to €9.69.
Last month, the bank announced plans to wind down its operations in Russia, and Sewing cautioned that the German economy would face a recession if there was an abrupt halt in Russian gas supplies. Before the war, Russian supplies accounted for 55 per cent of the country’s gas imports.
Although Sewing stressed on Wednesday that there “were no major defaults yet” from clients, the bank earmarked €300mn for loan losses in the quarter, up from just €100mn in the first quarter of 2021.
The lender’s common equity tier 1 ratio, a measure of the health of its balance sheet, slipped to 12.8 per cent, just 0.3 percentage points above its minimum target of 12.5 per cent and 0.9 percentage points lower than a year ago. This was driven by a 10 per cent increase in risk-weighted assets over the past year.