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What to Expect from Deutsche Bank’s 1Q16 Earnings

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Earnings preview

Deutsche Bank is expected to report its 1Q16 earnings on April 28, 2016. Wall Street (SPY) analysts expect Deutsche Bank to report 1Q16 EPS (earnings per share) of 1.12 euros and net income of 246 million euros. This is phenomenal growth compared to the loss of 2.1 billion euros reported by the company in the fourth quarter. Further, analysts expect the bank to post revenues of 9.1 billion euros and pretax profits of 386 million euros.

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The year ahead

In 2016, analysts expect Deutsche Bank to report earnings of 1.4 euros per share and net income of 2.1 billion euros. Meanwhile, revenues for 2016 are expected to be 31.8 billion euros. Analysts expect Deutsche Bank to deliver a return on assets of 0.08x and a return on equity of 1.1% in 2016. European banks (EUFN) like UBS (UBS), Credit Suisse (CS), and Barclays (BCS) have been struggling to maintain their profitability amid negative interest rates and strict regulations.

This year is expected to be the peak of restructuring for Deutsche Bank. The company plans to incur restructuring and severance expenses of 1 billion euros in 2016. Litigation charges will continue to put pressure earnings in 2016 but will be lower than 2015 levels. These cost pressures are expected to be offset by savings.

On an adjusted basis, costs are expected to be flat over the year. RWAs (risk-weighted assets) from non-core operating units are expected to drop, but operational risk RWAs will likely offset them. Overall, RWAs are expected to be flat in 2016. The common equity tier 1 ratio will likely decline during the first quarter but increase throughout the rest of the year.

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