Deutsche Bank will let its capital fall below target levels so it can “support clients and the broader economy in times of crisis”, Germany’s biggest lender said on Sunday night, as it pre-released first-quarter earnings.
Deutsche said group profits for the first quarter came in at around €206m on a pre-tax basis, better than consensus expectations for a pre-tax loss of €269m, but worse than the €292m pre-tax profits it made in the same period a year earlier. Net profits for the first quarter of 2020 were €66m, worse than the €201m in the first quarter of 2019.
The bank took €500m of provisions for credit losses during the most recent quarter, up from €140m in the first quarter of 2019, as it prepared for a wave of bad loans triggered by the coronavirus crisis.
“In anticipation of business opportunities and elevated client demand and in light of the current macroeconomic environment, Deutsche Bank is reviewing its 2020 CET1 [common equity tier one] and leverage ratio targets,” the bank said in a statement.
Deutsche, which has been battling to turn around its fortunes for the past five years, closed the first quarter with a CET1 ratio of 12.8 per cent.
The bank said: “The short-term implications of the Covid-19 pandemic make it difficult for the bank to accurately reflect the timing and the magnitude of changes to its original capital plan. Deutsche Bank’s priority is to stand by its clients without compromising on capital strength. It is therefore possible that the bank will fall modestly and temporarily below its previous CET1 target of at least 12.5 per cent.”
Deutsche added that it remained committed to its other targets, including those on cost-cutting. The bank, which is set to report earnings on Wednesday, released key numbers after a Sunday evening board meeting because they differed materially from analysts’ expectations, a spokesman told the FT.