04/28/2021 | Press release | Distributed by Public on 04/28/2021 07:24
Highest quarterly Group profit for seven years
Core Bank profit before tax of € 2.0 billion, more than double the prior year quarter, driven by significant profit growth across all core businesses
Capital Release Unit reduces quarterly pre-tax loss by 46% year on year with further RWA reduction
Net revenue growth of 14% to € 7.2 billion
Further year on year reduction in costs
Capital, risk and balance sheet strength maintained in the quarter
¹ For a description of this and other non-GAAP financial measures, see 'Use of non-GAAP financial measures' on pp 17-25 of the 1st quarter 2021 Financial Data Supplement
'Our first quarter is further evidence that Deutsche Bank is on the right path in all four core businesses, and is building sustainable profitability,' said Christian Sewing, Chief Executive Officer. 'In addition to substantial revenue growth over an already-strong prior year quarter, we demonstrated cost and risk discipline. We achieved a post-tax return on tangible equity of above 7%, and returns in the Core Bank are already ahead of our ambition for next year. These results give us confidence that we'll reach our 2022 targets.'
Deutsche Bank (XETRA: DBKGn.DB / NYSE: DB) today reported its best quarterly profit since the first quarter of 2014. This result was driven by revenue growth, a substantial reduction in provision for credit losses, and lower adjusted costs¹ year on year.
Significant profit growth across all businesses
Profit before tax was € 1.6 billion for the first quarter of 2021, up from € 206 million in the first quarter of 2020. Net profit was € 1.0 billion, compared to € 66 million in the prior year quarter. The Group delivered post-tax RoTE¹ of 7.4% in the quarter, versus a negative 0.3% in the prior year period, with a cost/income ratio of 77%. First-quarter profit includes the impact of € 571 million in bank levies in respect of the full year.
In the Core Bank, which excludes the Capital Release Unit, profit before tax more than doubled year on year to € 2.0 billion. This was driven by significant year on year profit growth across all four businesses. Core Bank post-tax RoTE¹ was 10.9%, up from 4.9% in the prior year quarter, while the cost/income ratio improved to 71%, versus 77% in the prior year period. Adjusted profit before tax¹, which excludes specific revenue items, transformation charges, impairments of goodwill and intangibles and restructuring and severance, was € 2.2 billion, also more than double the prior year quarter, and adjusted post-tax RoTE¹ was 11.9%. For the Core Bank results at a glance, please refer to the table on page 7.
Losses in the Capital Release Unit reduced by nearly half
The Capital Release Unit reported a loss before tax of € 410 million in the quarter, versus a loss before tax of € 765 million in the first quarter of 2020. This improvement was partly driven by net revenues of € 81 million in the quarter, compared to negative € 57 million in the prior year quarter. De-risking costs in the current quarter were offset by positive revenues from gains on asset sales and reserve releases, reflecting market conditions, and positive operating income.
Noninterest expenses in the Capital Release Unit declined by 28% year on year to € 498 million. This was driven predominantly by a 36% reduction in adjusted costs ex-transformation charges¹ to € 422 million, reflecting year on year reductions in service cost allocations, bank levy allocations and compensation costs.
The Capital Release Unit further reduced risk weighted assets (RWAs) which stood at € 34 billion at quarter-end, down by 24% from € 44 billion in the prior year quarter. De-risking of € 1.5 billion in the quarter was offset by model impacts and higher credit valuation adjustments (CVA). RWAs include € 23 billion in Operational Risk RWAs. Leverage exposure was € 81 billion at quarter-end, versus € 118 billion in the prior year quarter and € 72 billion in the fourth quarter of 2020. The quarter on quarter increase primarily reflected an incremental allocation of central liquidity reserves discussed at the Investor Deep Dive in December 2020. This, together with higher Prime Finance leverage, more than offset leverage exposure reductions from continued de-risking, maturities, market movements and other effects.
Revenues: financing and advising clients in supportive markets
Group net revenues were € 7.2 billion, up 14% year on year, the highest quarterly revenues since the first quarter of 2017 despite exits from non-strategic businesses as part of transformation. The year on year growth was driven primarily by 12% growth in Core Bank revenues to € 7.2 billion.
Net revenue development in Deutsche Bank's core businesses was as follows:
Significant improvement in provision for credit losses
Provision for credit losses was € 69 million in the quarter, down 86% from € 506 million in the first quarter of 2020, and 6 basis points (bps) of average loans on an annualised basis. Provisions for non-performing loans (Stage 3) were reduced by 40% versus the prior year quarter, due partly to fewer impairment events and partly to releases on specific exposures. Provisions were further reduced by releases of provisions for performing loans (Stage 1 and 2), which reflected an improved macro-economic outlook.
Continued conservative management of capital and balance sheet
The Common Equity Tier 1 (CET1) ratio rose to 13.7% during the quarter. CET1 capital was positively impacted by net income, partly offset by a dividend accrual of € 300 million, equity compensation and other effects.
Risk weighted assets (RWAs) rose slightly from € 329 billion to € 330 billion during the quarter, largely reflecting currency translation effects. An increase in RWAs of € 4 billion due to the European Central Bank's Targeted Review of Internal Models (TRIM) materialised as expected in the first quarter. The bank expects approximately 80 basis points of additional CET1 ratio burden from final TRIM decisions and other regulatory RWA inflation expected in the second quarter of 2021.
The Leverage Ratio was 4.6% (fully loaded) in the first quarter, down by 8 basis points from the end of the previous quarter and excluding certain central bank deposit balances. Including these balances, the ratio would have been 4.2%, down by 12 basis points versus the previous quarter. This development reflects growth in leverage exposure of 2% during the quarter, predominantly driven by currency translation effects, together with trading volumes and net loan growth. On a phase-in basis, the Leverage Ratio was 4.7%, down by 8 basis points quarter on quarter.
Liquidity reserves were € 243 billion at the end of the first quarter, stable versus the fourth quarter of 2020. The Liquidity Coverage Ratio was 146% and the surplus over regulatory requirements was € 70 billion.
Continued progress on sustainable financing and investment
Deutsche Bank will host a Sustainability Deep Dive on May 20, 2021.
Read the full media release in the downloadable PDF.