LONDON – Deutsche Bank on Wednesday reported a profit of € 908 million ($ 1.1 billion) for the first quarter, driven by continued strong performance in investment banking.
According to Refinitiv, the bank far exceeded the analysts' expectations for a net profit of 642.95 million euros and showed a significant improvement compared to the profit of 51 million euros achieved in the fourth quarter of 2020.
Here are the other highlights:
Net sales in the first quarter amounted to 7.2 billion euros compared to 6.35 billion euros in the same period in 2020. The CET1 rate (Common Equity Tier 1) – a measure of the solvency of banks – was 13.7 % versus 12.8% year-on-year first quarter 2020. Loan loss provisions in the first quarter were 69 million, down 86% from 506 million in the first quarter of 2020. The return on tangible equity (RoTE) was 7.4%, down from 3% in the same three months of last year.
Germany's largest lender followed in the footsteps of many of its Wall Street competitors and saw a significant leap in profits. Goldman Sachs, JPMorgan and Morgan Stanley have exceeded expectations for the first quarter over the past few weeks.
The strong report sent Deutsche Bank shares up more than 9% in Europe on Wednesday afternoon.
The income of the investment banks rose year-on-year by 32% to 3.1 billion euros, while earnings before taxes rose by 134% to 1.5 billion euros.
While the investment bank and wealth management unit, where revenue rose 23% year over year, were the main drivers of profit growth, CFO James von Moltke told CNBC on Wednesday that Deutsche Bank was also happy with the performance of its corporate and private banks .
"We've talked about how these companies are still battling negative interest rate headwinds, but we see underlying growth in them more than offsetting, or at least offsetting, the headwinds in interest rates," von Moltke told CNBC's Annette Weisbach .
The performance of the investment bank was mainly due to a 34% increase in sales in Fixed Income and Currencies (FIC) to 2.5 billion euros, which was supported by strong growth in the credit market compared to the previous year.
"The lending business was of course very strong year-on-year, so you had some market losses in the environment we had last year and a pretty strong environment for lending this year," said von Moltke.
"What I call macro-products of currencies, interest rates and emerging markets, we saw a further normalization in the course of the first quarter."
Von Moltke added that the normalization of the macro issues that had fueled investment banks' growth continued in the second quarter, but the general environment remains "reasonably encouraging".
The bank also avoided the aftermath of the collapsed US hedge fund Archegos Capital, where UBS, Credit Suisse, and several others saw significant gains in the first quarter.
In the past two years the bank has initiated a mass restructuring of its business, the costs of which, along with increased loan provisions, had weighed on earnings. However, the German returned to profit in 2020 and posted a net profit of 113 million euros for the full year.