Deutsche Bank is setting aside €500m (£437m, $542m) to cover an expected rise in losses linked to the COVID-19 pandemic. Deutsche Bank said it was taking the provision to cover expected future credit losses. Credit Suisse set aside a similar sum last week.
The novel coronavirus pandemic could also push Deutsche Bank to break self-imposed capital targets, the German lender warned. “We are firmly committed to mobilising our balance sheet to support our clients, who need us now even more,” chief executive Christian Sewing said in a statement. “Our decision to do so means that our Common Equity Tier 1 ratio may temporarily dip below our target minimum of 12.5%, without weakening our strong balance sheet.
“With our current ratio of 12.8%, we are comfortably above our minimum requirement of 10.4%. We’re convinced that this is in the best interests of all our stakeholders.”
The announcement came as Deutsche Bank reported better-than-expected first quarter results. The German lender made a pre-tax profit of €206m in the first three months of 2020 and had net income of €66m. Revenue for the quarter was €6.4bn, flat on 2019.
While pre-tax profit and net income were both down year-on-year, the figures were higher than analysts had expected and spurred the stock higher. Shares in Deutsche Bank jumped 10% on Monday morning.
“We’re very satisfied that our first-quarter results demonstrate the progress we’re making with the transformation of our bank, the operating strength of our business, and our resilience,” Sewing said. “We owe this to the outstanding efforts of our staff.”
Last July Sewing launched a sweeping three-year overhaul of Deutsche Bank that included thousands of job cuts. Sewing hopes to end persistent underperformance at the bank, which has seen its share price fall to all-time lows in recent years.