US bond market fluctuated greatly, Deutsche Bank's net profit surged by 39% in Q1, as tariffs increased credit provisions | Financial report news

Source: Wall Street Insights

Amid the market turmoil caused by Trump's tariff policies, Deutsche Bank's bond and currency trading revenue reached a 12-year high, driving the company's revenue to increase by 9.6% in the first quarter and its net profit to surge by 39%. At the same time, Deutsche Bank increased its credit provisions due to the possible impact of the US-imposed tariffs, and the management warned that the shadow of the global trade war still loomed over the market.

Deutsche Bank announced its first-quarter financial report on Tuesday. The key financial data are as follows:

Net revenue was 8.52 billion euros, an increase of 9.6% year-on-year, exceeding the estimated 8.3 billion euros. Among them, the revenue from fixed income and currency trading business reached 2.9 billion euros, the highest level since 2013.

Pre-tax profit was 2.84 billion euros, a 14-year high, an increase of 39% year-on-year, exceeding the estimated 2.63 billion euros. Net profit increased by 39% to 1.78 billion euros, far exceeding the previous analysts' expectation of 1.64 billion euros.

The Common Equity Tier 1 capital adequacy ratio reached 13.8%, higher than 13.4% in the same period last year.

The cost-income ratio improved to 61.2%, better than the expected 64%.

These results mark an important milestone for Deutsche Bank - the bank has now recovered all the losses incurred between 2015 and 2019. Christian Sewing, CEO of Deutsche Bank, said:

The results of the first quarter put us on track to achieve all our goals for 2025.

Record-breaking trading business

The strong performance in the first quarter was partly attributed to the outstanding performance of its global investment banking business in bond and currency trading in a volatile market environment.

The revenue of Deutsche Bank's fixed income and currency trading business soared by 17% to 2.9 billion euros in the first quarter, reaching the highest level since 2013, which also exceeded analysts' expectations.

The overall revenue of the investment banking business reached 3.36 billion euros, an increase of 10% year-on-year, higher than the estimated 3.29 billion euros. However, the revenue from financing issuance and advisory business decreased by 8%, and a 90 million euro impairment provision was made for an unnamed position in its leveraged financing business.

The asset management business performed particularly brightly, with revenue reaching 730 million euros, an increase of 18% year-on-year, exceeding the estimated 693.3 million euros.

Beware of trade war risks and increase loan loss provisions

Despite the strong performance, Deutsche Bank remains cautious about the future.

James von Moltke, the chief financial officer, revealed in an interview with Bloomberg TV earlier that the activities of some trading-dependent business departments "significantly" slowed down in April, and fixed income trading was also impacted in the first two weeks of this month before returning to a "healthy" performance.

Although the provisions for non-performing loans decreased by 27% year-on-year, the overall credit loss provisions increased to 471 million euros, 16% higher than expected. The bank specifically mentioned an additional provision of 130 million euros for well-performing loans, which includes "overlapping factors related to the uncertainties of the geopolitical and macroeconomic prospects of the United States."

Sewing warned in a memo to employees:

The shadow of a potential global trade war still looms over the market. Although we hope the situation will not deteriorate, uncertainties and volatility are likely to remain high in the foreseeable future.

The German economy is stagnant, and long-term goals face challenges

Deutsche Bank's business spans from Sydney to New York, but its important domestic market, the German economy, is in a state of stagnation. Senior officials of the German central bank warned last week that Germany may face a mild recession in 2025, which could erode bank profits and lead to loan defaults by corporate customers.

When Deutsche Bank strives to achieve its ambitious profit and cost goals, some analysts are skeptical about the bank's ability to achieve all its goals. In January this year, Deutsche Bank had already abandoned a key cost target.

However, the German government's bold relaxation of the long-standing government spending cap is regarded as a positive signal for the bank and the economic growth of the largest economy in Europe.

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