Deutsche Bank AG, Europe’s largest investment bank by revenue, will probably say first-quarter profit fell 39 percent as earnings from debt trading dropped.
Net income in the three months through March will fall to 1.01 billion euros ($1.4 billion) from 1.65 billion euros in the first quarter of 2013, according to the average of 10 analyst estimates compiled by Bloomberg News. Debt trading income may slide 22 percent to 2.12 billion euros over the same period, according to the average of nine estimates. The company is scheduled to publish quarterly earnings tomorrow.
Global investment banks are contending with a slowdown in trading revenue as clients hold off investing amid uncertainty over monetary policy and geopolitical crises. Deutsche Bank’s earnings from buying and selling fixed income, currencies and commodities for clients have come under further pressure as it follows European competitors in shrinking its balance sheet to meet stricter regulatory requirements for capital levels.
“Deutsche Bank had a pretty slow start to the year,” Stefan Bongardt, an analyst with Independent Research GmbH who recommends investors buy the shares, said by phone from Frankfurt. “Their efforts to build capital by shrinking assets means they’ve also seen revenue decline more than their competitors in the U.S.”
The five biggest U.S. investment banks saw their combined revenue from such trading fall 13 percent to $15 billion in the first three months of the year from the same period in 2013, data compiled by Bloomberg Industries show. Deutsche Bank relied on that business for 22 percent of its income last year, filings show.
Deutsche Bank’s shares fell 0.2 percent to 31.26 euros at 10:24 a.m. in Frankfurt, valuing the company at 31.9 billion euros. The 43-member Bloomberg Europe Banks & Financial Services Index rose 0.4 percent.
The lender’s common equity Tier 1 ratio under Basel III rules, a key measure of financial strength, will probably rise to 9.8 percent at the end of March from 9.7 percent three months earlier, according to the average of nine analyst estimates. Five analysts said the ratio would increase, three expected a decline and one anticipated no change.
The company is considering selling about 5 billion euros of shares to raise capital levels, Handelsblatt reported last week, citing unidentified people in the finance industry. Deutsche Bank wants to catch up with the capital ratios of its competitors while complying with new regulation and seizing growth opportunities in investment banking, Handelsblatt said.
Net interest income is expected to fall to 3.61 billion euros in the fourth quarter from 3.65 billion euros a year earlier, according to the average of six analysts’ estimates. Pretax profit in global transaction banking and asset and wealth management is expected to rise, while a decrease is foreseen in pretax profit from private and business clients, the survey showed.
The following is a table of average first-quarter estimates, year-earlier figures and results from the previous quarter, as well as the number of analysts surveyed. The data is in millions of euros.
Q1 2014 Q1 2013 Q4 2013 Number Expected Reported Reported Analysts Revenue before loan 8,526 9,391 6,564 10 loss provisions Net interest income 3,610 3,650 3,895 6 before loan-loss provisions Loan-loss provisions 404 354 725 9 Fee and commission income 2,913 2,995 3,074 6 Personnel costs 3,189 3,548 2,672 2 Non-interest expenses 6,636 6,623 7,607 9 Pretax profit/(loss) 1,482 2,414 (1,768) 10 Net income/(loss) 1,007 1,651 (1,360) 10 Common equity Tier 1 ratio 9.8% 8.8% 9.7% 9 under full Basel III rules Q1 2014 Q1 2013 Q4 2013 Number Expected Reported Reported Analysts Corporate Banking & Securities Sales & trad., equity rev. 775 766 541 9 Sales & trad., debt and 2,118 2,731 979 9 other products revenue Origination, equity rev. 182 152 241 5 Origination, debt rev. 404 453 320 5 Advisory rev. 111 69 140 5 Loan products rev. 286 250 358 5 Total revenue 3,896 4,561 2,461 8 Non-interest costs 2,704 2,654 2,309 6 Pretax profit 1,133 1,846 87 7 Q1 2014 Q1 2013 Q4 2013 Number Expected Reported Reported Analysts Global Transaction Banking: Pretax profit 325 318 86 7 Private & Business Clients: Pretax profit 479 483 218 8 Asset & Wealth Management: Pretax profit 247 220 201 8 Non-Core Operations Unit: Pretax (loss) (474) (196) (1,228) 7