Deutsche Bank, a German lender, announced on Thursday that it had recorded a net profit of 1.158 billion euros ($1.28 billion) for the first quarter.
This is a positive development, as the bank had faced market fears of a global banking crisis during a turbulent month. The net profit was also higher than the Reuters poll of analysts’ consensus forecast of 864.54 million euros and up from 1.06 billion euros for the same period in 2022.
This marks the eleventh straight quarter of profit for the bank, which has been undergoing a comprehensive restructuring plan since 2019 to reduce costs and increase profitability.
The CEO of Deutsche Bank, Christian Sewing, said that the bank’s strategy is on track to meet or exceed its 2025 targets. He added that the bank aims to accelerate the execution of its strategy by raising ambitions for operational efficiency, boosting capital efficiency, and seizing opportunities to outperform its revenue growth targets.
Although the bank’s first-quarter results were impressive, the report revealed that deposits decreased over the quarter to 592 billion euros from 621.5 billion euros at the end of 2022.
Deutsche Bank attributed the decline to increased price competition, normalization from elevated levels in the prior two quarters, and market volatility at the end of the quarter.
According to Deutsche Bank’s CFO, James von Moltke, the market turmoil in March enabled the bank to prove its mettle to a skeptical market. He said that the bank was tested during an interesting market environment in March, and the silver lining of the test is that the bank passed with flying colors.
The market was looking for vulnerabilities in banks, and in scrutinizing Deutsche Bank, market participants saw a strong and profitable business model, stable balance sheet and deposit base, a very moderate and well-underwritten commercial real estate book, and no near-term financing needs.
Deutsche Bank Eyes Operational Efficiency
To accelerate the execution of its strategy, Deutsche Bank plans to boost its operational efficiency. This involves identifying opportunities to streamline and optimize its operations and implementing them swiftly. The bank also aims to increase its capital efficiency to drive returns and support shareholder distributions.
This involves identifying opportunities to optimize its capital structure, reduce capital usage, and improve its risk-weighted asset density. Finally, the bank plans to seize opportunities to outperform its revenue growth targets by increasing its market share in targeted segments, expanding its product and service offerings, and leveraging its global network.
In an interview with CNBC, Deutsche Bank’s CFO James von Moltke claimed that the market’s scrutiny of the bank during the turbulent month of March 2023 had shown that it was a stable, well-run, and well-risk managed bank.
He stated that the bank had proven its mettle to a skeptical market during the testing environment of March and that it had passed the test with flying colors. Von Moltke also suggested that Deutsche Bank could benefit from the fallout of Credit Suisse’s emergency rescue by UBS, as it would be a natural beneficiary of the stricken Swiss lender’s demise.
He further explained that he expects UBS to be a formidable competitor in the future, but the concentration of banking relationships with one provider for many of Credit Suisse’s clients would make them diversify their banking relationships, and Deutsche Bank is well-positioned to profit from this opportunity.
In conclusion, Deutsche Bank’s first-quarter results were impressive, and the bank is on track to meet or exceed its 2025 targets. The bank plans to accelerate the execution of its strategy by boosting operational efficiency, capital efficiency, and revenue growth targets.
While the decline in deposits is a concern, the bank is taking steps to address this by identifying opportunities to optimize its operations, capital structure, and risk-weighted asset density, as well as expanding its product and service offerings and leveraging its global network.
Overall, Deutsche Bank’s future looks promising, and the bank is well-positioned to weather any future market turbulence.