Deutsche Bank hints at loan defaults among customers as profit falls from last year
Deutsche Bank also set aside 500 million euros for credit losses
Chief economist with Deutsche Bank Torsten Slok discusses what to expect from markets in the coming weeks amid coronavirus fears.
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Deutsche Bank said Sunday it expects to report a significant drop in net income during the first quarter compared to last year and will set aside 500 million euros ($543 million) for potential loan losses as it braces for the financial impact of the coronavirus pandemic.
In a pre-release Sunday, the German-based bank said it expects net profit for the first quarter to be 66 million euros ($71.5 million), compared with 201 million euros in the same period last year.
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The bank will release full details of its earnings results on Wednesday as scheduled. Revenues are expected to be 6.4 billion euros.
Deutsche Bank also set aside 500 million euros for credit losses as widespread lockdowns and disruptions of supply chains throughout the world hammer the global economy.
“This extraordinary economic environment suggests that we will see a higher level of credit defaults,” Deutsche Bank said.
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The embattled lender also said that its common equity tier 1 ratio (CET1), a measure of a bank’s financial strength, dropped to 12.8 percent at the end of the first quarter, down from 13.6 percent in the year-ago period.
"The decline in the CET1 ratio in the quarter included approximately a 30 basis points negative impact from the revised securitization framework as expected, and approximately 40 basis points of items precipitated by the COVID-19 pandemic," the bank said. It continued: “It is possible that the bank will fall modestly and temporarily below its previous CET1 target of at least 12.5% and the fully-loaded leverage ratio target of 4.5 percent by the end of 2020."