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Deutsche Bank steps up COVID-19 impact provisions amid ongoing restructure

Jill Petzinger
Germany Correspondent, Yahoo Finance UK
·3 min read
30 January 2020, Hessen, Frankfurt/Main: Christian Sewing, Chairman of the Management Board of Deutsche Bank, will speak during the annual media conference at the bank's headquarters. Deutsche Bank has slipped even deeper into the red in 2019 due to the Group restructuring. In the 2019 financial year, the bank reported a loss of around 5.7 billion euros. Photo: Arne Dedert/dpa (Photo by Arne Dedert/picture alliance via Getty Images)
Christian Sewing, management board chairman of Deutsche Bank, pictured at the annual media conference at the bank's headquarters on 30 January 2020, Hessen, Frankfurt/Main. Photo: Arne Dedert/picture alliance via Getty Images

German lender Deutsche Bank (DBK.DE) on Wednesday said it stepped up provisions for the impact of COVID-19 after it posted a net loss attributable to shareholders of €77m (£69m, $89m) in the second quarter.

The bank allocated credit loss provisions of €761m, up from just over €500m in the last quarter, to reflect the expected impact of the coronavirus pandemic.

In its second quarter results statement, Deutsche Bank posted a group pre-tax profit of €158m, compared to a pre-tax loss of €946m in the same quarter last year, and beating consensus estimates of analysts interviewed by the bank.

READ MORE: Deutsche Bank sets aside €500m for COVID-19 losses

Deutsche Bank is currently in the middle of a major restructure after reporting a raft of annual losses over the past five years.

The bank said in its statement that despite costs from its restructuring and a rise in credit-loss provisions, it made a net profit of €61m versus a net loss of €3.1bn in the same period of 2019. Group net revenues year-on-year were up by 1% to €6.3bn despite it exiting equities.

“In a challenging environment we grew revenues and continued to reduce costs, and we’re fully on track to meet all our targets,” Deutsche Bank chief executive Christian Sewing said in a statement. “This enabled us to more than offset higher provision for credit losses and remain profitable while supporting clients through difficult conditions.”

In terms of how the coronavirus situation will unfold this year, Deutsche Bank said today they believe governments and health systems have learnt a lot in the first phase of the pandemic, and that it is “going to be a balancing act, with containment on one hand ... and balancing the damage to people’s lives and the economy on the other.”

Consensus estimates compiled by the German lender last week showed analysts expected the bank to post €6bn in revenue in the quarter, a slightly lower than the same period last year. The consensus was for a net loss of €133m attributable to shareholders in the last quarter. The bank reported a €3.2bn loss in the same quarter last year.

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The second quarter results follows a better-than-expected first three months of 2020, when the German lender made a pre-tax profit of €206m and had net income of €66m, with Q1 revenue coming in at €6.4bn, flat on 2019.

Deutsche Bank made a net loss of €5.3bn in 2019, against a forecast of €5.1bn.

In July 2019, Sewing launched his multi-billion-over overhaul at the bank, including mass job cuts spread over three years, and an eventual exit from all businesses related to buying and selling of equities.