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Deutsche Bank: Better than suspected Q1 earnings

April 29, 2014

Deutsche Bank (Attractive*) reported a decline in Q1 earnings due to weaker trading revenue, but exceeded analysts’ estimates. Net income dropped 34% to EUR 1.08bn in the three months through March from a year earlier. That compared with the EUR 1.01bn median analysts’ estimate compiled by Bloomberg. Revenue from trading fixed income, currencies and other products decreased 10% to EUR 2.43bn, exceeding the EUR 2.12bn consensus.

Deutsche Bank is among global investment banks contending with a slowdown in trading revenue as clients shy away from investing amid uncertainty over monetary policy and a geopolitical crisis with Russia over Ukraine. A positive are the decrease in provisions for legal costs. On the other hand, the bank’s common equity Tier 1 capital ratio under Basel III rules, a key measure of financial strength, fell to 9.5% from 9.7% at the end of December. Yesterday, Deutsche Bank said after markets closed that it will sell at least EUR 1.5bn in subordinated debt to help raise capital levels and meet stricter limits on leverage, as the bank wants to catch up with the capital ratios of its competitors while complying with new regulations. The Q1 result shows that the bank’s turnaround needs patience. We confirm our rating.


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