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Deutsche Bank (DB) Q1 Earnings Improve Y/Y on Higher Revenues

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Deutsche Bank (DB - Free Report) reported first-quarter 2022 net income of €1.23 billion ($1.38 billion) compared with the year-ago quarter’s €1.04 billion. Also, the German lender reported a profit before taxes of €1.7 billion ($1.91 billion), up 4% from the year-ago quarter.

First-quarter results benefited from higher net revenues and lower expenses. Strong capital deployment activities in the quarter were another positive. An increase in provision for credit losses was an offsetting factor.

Revenues Rise, Costs Decrease & Provisions Up

The bank generated net revenues of €7.3 billion ($8.2 billion) in the first quarter, up 1.3% year over year. This upside primarily resulted from higher revenues in all segments except Corporate & Other.

Non-interest expenses of €5.4 billion ($6.1 billion) decreased 4% from the prior-year quarter’s level despite a rise in annual bank levies. Adjusted costs ex-transformation charges and bank levies were down 3% year over year to €4.6 billion ($5.2 billion).

Provision for credit losses came in at €292 million ($327 million), up 3.1% from the first-quarter 2021 figure, which recorded €223 million.

Segmental Performances

Net revenues of €1.5 billion ($1.7 billion) at the Corporate Bank division were up 11% year over year. The segment recorded the highest revenues since the launch of the transformation program and the second consecutive quarter of double-digit revenue growth.

Investment Bank’s net revenues totaled €3.3 billion ($3.7 billion), up 7% year over year. This highlights growth in fixed income and currencies revenues, offset by a decline in origination and advisory revenues.

Private Bank reported net revenues of €2.2 billion ($2.5 billion), up 2% year over year. Higher revenues (excluding adjustments) from Private Bank Germany, along with the International Private Bank revenues, led to this upside.

Asset Management generated record net revenues of €682 million ($765 million), up 7% year over year, mainly aided by increased management fees. Net asset inflows excluding cash during the quarter were €5.7 billion ($6.3 billion).

Corporate & Other reported negative net revenues of €353 million ($396 million) compared with the negative net revenues of €73 million reported in the prior-year period.

Capital Release reported negative net revenues of €5 million ($5.6 million) against net revenues of €81 million recorded in the year-ago quarter.

Mixed Capital Ratios

Leverage ratio on an adjusted fully-loaded basis was 4.6%, stable compared with the year-ago quarter. Risk-weighted assets (“RWA”) were €24.8 billion ($27.6 billion) at the end of first quarter, compared with €25.7 billion reported in the year-ago quarter. The company remains ahead of its year-end 2022 targets for both leverage exposure and RWA reduction, and has cut leverage exposure by 86% and RWA by 61% since its creation in mid 2019.

However, Deutsche Bank’s Common Equity Tier 1 (CET1) capital ratio (fully loaded) came in at 12.8% as of Mar 31, 2022, down from the year-ago quarter’s 13.7%.

Capital Deployment

By the end of the first quarter, Deutsche Bank had completed around 50% of its €300-million share repurchase for termination, announced on Jan 26, 2022 as part of the bank’s aim to distribute approximately €700 million of capital to shareholders during the year. This repurchase program was completed this month.

Our Viewpoint

Deutsche Bank reported decent first-quarter results. DB was successful in increasing revenues with its initiatives. Also, declining expenses in the quarter were a tailwind. The German lender’s cost reduction on the back of lower headcount from the completion of information technology systems and ongoing rationalization of real estate holdings looks encouraging. However, an increase in provision for credit losses was an offsetting factor.

Deutsche Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in net interest income (“NII”) and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. A fall in NII, net interest margin and a rise in expenses were the key undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline, primarily due to a fall in fee income. Margin contraction and capital position deterioration played spoilsports for FITB.