Deutsche Bank AG, which runs Europe’s biggest investment bank, will update investors on Thursday on how it’s weathering this year’s turmoil in global markets, in the first full quarter since co-Chief Executive Officer John Cryan unveiled his restructuring plans.
Trading revenue, the bank’s biggest source of income, probably dropped 29 percent in the quarter from a year earlier, analyst estimates compiled by Bloomberg show. The five biggest U.S. investment banks saw their combined trading revenue fall 22 percent over the same period, hurt by market swings and stiffer regulation. Deutsche Bank may struggle to maintain its market share as Cryan cuts back the securities business.
Cryan said as recently as last month that the lender’s common equity Tier 1 ratio, a key measure of financial strength, would fall to a low point in the first quarter. Analysts at Macquarie Group Ltd. have said there is a risk that “poor” earnings in the first half and delays to Deutsche Bank’s planned sale of consumer lender Deutsche Postbank AG will force the company to tap investors. Cryan said last month that he doesn’t plan a capital increase anytime soon.
Deutsche Bank probably deepened cost cuts in the first quarter, led by a drop in legal provisions from a year earlier. With the company seeking to eliminate 9,000 jobs under Cryan’s overhaul, charges related to restructuring and severance may have more than tripled in the period. Analysts at JPMorgan Chase & Co. say they want to see the lender commit to further savings at the securities unit to address volatile markets.
Deutsche Bank said in January that its provisions for risky loans will probably increase this year from “historic low levels” in 2015. Analysts expect the company to set aside more funds to cover its exposure tied to a slump in commodities markets. The bank may have “dodged a bullet” because it has extended fewer loans to oil exploration and production companies than some of its competitors, Cryan said last month.