Net income at Germany's largest bank more than halved as the lender weathered market volatilities and continued to offload “non-core” operations.
Deutsche Bank's net income was down 58 per cent year-on-year at €236 million ($268 million) in the first quarter of 2016, though this was in stark contrast to the €2.125 loss in the final quarter of 2015.
Revenue fell 22 per cent year-on-year to €8.1 billion, which the bank attributed to challenging market conditions as well as strategic decisions to downsize and exit certain businesses. Revenues in its private, wealth and commercial banking unit fell 17 per cent to €1.7 billion euros or down 5 per cent adjusted for a negative impact of €247 million related to the bank’s stake in Chinese lender Hua Xia Bank. Deutsche expects to close the sale of that stake in the second quarter.
The division generated a pre-tax income of €71 million, compared to a €522 million loss in the previous quarter and a pre-tax profit of €403 million in the corresponding period of 2015. Wealth management revenues stood at €498 million, down 8 per cent year-on-year, due to reduced client activity and lower market levels.
“Financial markets were challenging during the first quarter, largely reflecting concerns about the outlook for the global economy. This uncertainty led to a decline in client activity in the capital markets, and our revenues fell from the prior year, most notably in our trading and corporate finance businesses. Our results reflect these challenging conditions as well as the impact of our strategic decisions to exit or reduce significantly selected businesses,” said John Cryan, co-chief executive.
“Implementing our strategy remains our core focus and 2016 will be the peak year for our restructuring efforts. [...] We continue to upgrade our technology, strengthen our control environment, and work towards resolving outstanding litigation matters.”
During the quarter, litigation expenses were down by €1.4 billion versus a year prior. Deutsche Bank’s capital ratio, a measure of financial strength, fell from 11.1 per cent to 10.7 per cent. The bank expects the sale of its Hua Xia Bank stake to add around 50 basis points.
Shares of the bank were up 3.6 per cent on Thursday morning in Frankfurt.