Deutsche reports GTB profits despite mounting margin and competition pressures

By:
Duncan Kerr
Published on:

Pre-tax income from Deutsche Bank’s global transaction banking (GTB) business grew 15% in the first quarter compared with a year earlier, despite being hit by “intense margin and competitive pressure”.

Announcing the results on Tuesday, Deutsche said a combination of factors buffeted the GTB business in the first three months of the year, dragging revenues down marginally 1%, or €6 million, to €1 billion.

Persistently low interest rates and a "still highly competitive environment" were the main factors impacting revenues, with a difficult geopolitical backdrop adding additional pressure to the GTB business.

The bank nevertheless reported that pre-tax income rose 15%, or €49 million, to €367 million due to what it described as "lower provision for credit losses", although this was "offset partially by a higher cost base".

The bank said provision for credit losses fell to €24 million in the first quarter compared with €92 million a year earlier, due largely to the "non-recurrence of single client credit event in trade finance" last year as well as lower provisions in its Netherlands commercial banking activities.

Higher costs in Deutsche’s GTB business related to non-interest expenses, which increased 2%, or €14 million, compared with a year earlier. The bank also said that first quarter included higher costs related to the "OpEx programme of €19 million" compared with €7 million last year.

Breaking down business performance further, Deutsche said revenues in trade finance increased due to strong volumes, while revenues from cash management came under pressure, impacted by low interest rates.

Revenues in trust and securities services "showed a solid development", according to Deutsche, based on growing volumes and included a gain on the sale of registrar services GmbH.

In other core businesses, Deutsche said pre-tax income from corporate banking and securities (CB&S) fell 22% to €1.5 billion compared with a year earlier, while pre-tax income from private and business clients rose 8% to €520 million. In asset and wealth management, Deutsche said pre-tax income fell 23% to €169 million and suffered a 14% decline from "lower non-recurring fund management revenues and higher cost-to-achieve".

Deutsche, Juergen Fitschen, Anshu Jain
Jürgen Fitschen and 
Anshu Jain, Deutsche 
co-chief executives

Deutsche’s non-core operations unit reported a loss before income tax of €532 million, which included a loss of €191 million from the special commodities group, which was transferred from CB&S in the quarter.

Commenting on the results, Jürgen Fitschen and Anshu Jain, co-chief executives, said: "Our core businesses all contributed to a resilient performance in the quarter, which enabled us to grow our common equity base by over €1 billion.

"Corporate banking and securities performed well in challenging markets, private and business clients produced first-quarter profitability, which was amongst its best ever, global transaction banking grew pre-tax profit despite intense margin and competitive pressure, while Deutsche asset and wealth management produced solid underlying results and positive net money flows while simultaneously progressing business integration."