Germany’s bank experienced a profit increase of 134% in the first quarter, avoiding damages from the collapse of Archegos.
On Wednesday, for the first three months of 2020, Deutsche Bank posted a pre-tax profit of €908 million. This new improvement marks its best quarterly performance in seven years, and a significant increase on its profit of just €66 million for the same period in 2020.
All of the bank’s core divisions saw a marked increase, with its investment banking arm outperforming all others with a 134% rise in pre-tax profits to €1.5 billion. Revenue across the bank also increased by 14% to €7.2 billion, its highest total since 2017.
The CEO, Christian Sewing has pointed to effective risk management and tight control of cost as the key drivers of such growth. In his statement, he said: “our first quarter is further evidence that Deutsche Bank is on the right path in all four core businesses, and is building sustainable profitability. In addition to substantial revenue growth over an already strong prior year quarter, we demonstrated cost and risk discipline.”
Deutsche Bank’s strong quarterly performance is also remarkable because it shows how well the firm worked to avoid any damage from the implosion of Archegos Capital Management. Archegos is a family-run hedge fund that collapsed in March and negatively impacted the revenues of major banks connected to it. Credit Suisse saw an immediate loss of $4.7 billion, while Morgan Stanley and Nomura lost $1 billion and $1.43 billion respectively.
Despite being a client of the hedge fund, Deutsche Bank made no mention of Archegos in its quarterly report. The bank is said to have had a relatively limited amount of business with Archegos and was able to make a quick exit upon its collapse. These two factors greatly minimised its exposure and the damages to its revenue.
Upon publishing this quarterly report, early trading on Wednesday saw shares in Deutsche Bank rise as much as 6%.
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