Deutsche Bank says might temporarily miss capital target

BERLIN (Reuters) – Deutsche Bank (DBKGn.DE) announced first-quarter results it said were above market expectations late on Sunday, but warned it might temporarily miss its capital requirement target as it extends more credit due to the impact of the COVID-19 pandemic.

FILE PHOTO: The logo of Deutsche Bank is in London, Britain July 8, 2019. REUTERS/Simon Dawson/File Photo

In an unscheduled statement, Deutsche Bank said it expected to report quarterly net income of 66 million euros (57.7 million pounds) on revenues of 6.4 billion euros, with provisions for credit losses of 500 million euros. It said it would give full details as planned on April 29.

Analysts had expected a net loss of 106 million euros, according to Refinitiv data.

The fragile bank has been trying to engineer a turnaround, and some executives and investors privately fear that the pandemic could stall the bank’s restructuring efforts.

Germany’s biggest lender said it was possible that the bank would fall “modestly and temporarily” below its previous common equity tier 1 (CET 1) target of at least 12.5% due to the current global recession sparked by the coronavirus.

The ratio was 12.8% at the end of the first quarter, down from 13.6% at the end of 2019, including 30 basis points of negative impact from a revised securitization framework and approximately 40 basis points due to the COVID-19 pandemic.

“This revised outlook acknowledges that credit extension to support clients at this time could increase risk weighted assets for several quarters,” it said, adding that pending regulatory changes could also improve the bank’s reported CET 1 ratio.

“Deutsche Bank remains committed to maintaining a significant buffer above its regulatory requirements at all times,” it said. “Deutsche Bank’s priority is to stand by its clients without compromising on capital strength.”

The bank said it was also unlikely to reach its 2020 fully-loaded leverage ratio target of 4.5% without regulatory adjustments to the leverage ratio calculation.

It confirmed its other financial targets, including for 2020 adjusted costs excluding transformation charges and reimbursable expenses of 19.5 billion euros.

Deutsche Bank already warned last month that the impact of the coronavirus outbreak may affect its ability to meet its financial targets as the bank undergoes a major revamp after years of losses.

Last year, Deutsche posted a 5.7 billion euro loss, its fifth in a row, as the cost of its latest turnaround attempt hit earnings.

Until the outbreak of the coronavirus in Europe, things had been looking up for Deutsche this year. Its shares had rallied, it successfully issued a risky bond, regained market share in Germany and added a new top investor.

($1 = 0.9241 euros)

Reporting by Emma Thomasson; Editing by Daniel Wallis

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