Status: 04/27/2022 08:30 a.m
Despite increased uncertainty about the Ukraine war, Deutsche Bank has generated its highest quarterly profit in nine years. Commerzbank also reported a significant jump in profits.
The new financial year got off to an unexpectedly positive start for the German listed banks. Both the industry leader Deutsche Bank and Germany’s second-largest private bank, Commerzbank, recorded significant profit growth and thus exceeded analysts’ expectations.
Deutsche Bank earns a surprising amount
“The results of all business areas are in or above plan, and we have achieved our highest quarterly profit in nine years,” said Deutsche Bank boss Christian Sewing. The bottom line is that Germany’s largest money house earned almost 1.1 billion euros in the first quarter – and thus 21 percent more than in the same period last year.
Analysts had expected only around 950 million euros on average. Deutsche Bank was thus able to report its seventh quarter of profits in a row. Group income rose by one percent to 7.3 billion euros. They were as high as they were last in the first quarter of 2017.
Risk provisions due to Ukraine war quadrupled
The growth in profits and earnings is particularly remarkable against the background of the Ukraine war, which is why Deutsche Bank had to increase its risk provisioning: With 292 million euros, the DAX group set aside four times as much money for possible loan defaults as in the first Quarter of 2021. According to the bank, its net credit exposure related to Russia decreased by 21 percent to EUR 0.5 billion.
CFO James von Moltke was satisfied with the results: “We are in a good position to achieve our goals for this year.” In the summer of 2019, CEO Sewing ordered the Frankfurt institute to undergo a comprehensive restructuring, trimmed the in-house investment bank and initiated the reduction of thousands of jobs. The aim is to achieve an after-tax return of eight percent this year. For comparison: in 2021, this important indicator was a meager 3.8 percent.
Commerzbank doubles profit
Commerzbank had already presented its balance sheet for the first quarter in the evening and thus also caused a positive surprise. The surplus more than doubled in the first quarter to EUR 284 million within a year, said Germany’s second largest private bank yesterday after the stock market closed based on preliminary figures. A year ago, a profit of 133 million euros was still on the books in the first quarter.
However, as with Deutsche Bank, possible risks related to the Russian war against Ukraine weighed on the balance sheet. Loan loss provisions more than tripled within a year. It climbed to 464 million euros after 149 million euros a year ago.
But that’s not the only parallel to Deutsche Bank: Like Christian Sewing, Commerzbank boss Knof ordered a radical restructuring of his institute. Under his leadership, the Frankfurt institute was back in the black in 2021. For the current financial year, he confirmed the forecast of consolidated earnings of more than one billion euros.
Stocks on the up
Analysts were impressed by the Commerzbank figures: the money house presented strong key data with solid earnings growth, wrote JPMorgan analyst Kian Abouhossein. The bank’s unexpectedly strong key data and the confirmed annual outlook should have a positive effect on the share, emphasized analyst Anke Reingen from the Canadian bank RBC.
In fact, according to pre-market indications, the Commerzbank share should start XETRA trading with a strong premium of over six percent. The figures from Deutsche Bank are also well received on the market. The stock of the money house listed in the DAX is traded a good two percent higher in the morning.
Deutsche Bank generates highest quarterly profit
Ursula Mayer, HR, 4/27/2022 8:38 am