Deutsche Bank (DB) has surprised investors with an ad hoc pre-release of its first quarter earnings results, three days before the scheduled date.
The bank expects to report group profit before tax of 206 million euros and net income of 66 million euros, above market expectations.
Revenues are expected to be 6.4 billion euros (easily beating the 5.7 billion euro consensus) and including contributions to the Single Resolution Fund of 0.5 billion euros. Provisions for credit losses are expected to be 0.5 billion euros, or 44 basis points of loans
Meanwhile Deutsche Bank’s Common Equity Tier 1 (CET1) ratio was 12.8% at quarter end, down from 13.6% at year end. According to the report, the decline included a 30 basis points negative impact from the revised securitization framework, and 40 basis points of items caused by the Covid-19 pandemic.
Looking ahead, the bank updated its financial targets- writing “Management has made the clear decision to allow capital to fall modestly and temporarily below its target in order to support clients and the broader economy at this time of economic crisis.”
According to the statement, it is now possible that the bank will fall ‘modestly and temporarily’ below its previous CET1 target of at least 12.5%. However, the bank reassured investors that it will maintain a significant buffer above the 10.4% minimum requirement and that it will continue to work towards its 2022 targets of a 12.5% CET1 ratio target and 5% leverage ratio.
This potential additional balance sheet growth also means that the bank is unlikely to reach its 2020 fully-loaded leverage ratio target of 4.5%, says Deutsche Bank. The company reaffirmed its other financial targets, and said that full details will be disclosed as planned on April 29.
As for why the bank sent out the release three days early, it explained that “Management is seeking to address uncertainties around market expectations on the bank’s earnings and media reports on a loss in the quarter.” At the same time, it is also obliged to inform the market immediately about changes to communicated targets.
Overall, analysts share a bearish outlook on the stock’s prospects. It holds a Moderate Sell consensus on TipRanks with 1 buy rating, 7 hold ratings and 9 sell ratings. Even though shares have plunged over 20% year-to-date, the average analyst price target of $6 indicates upside potential of just 2%. (See DB stock analysis on TipRanks).