Deutsche Bank Sidesteps Archegos Hit
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The German bank pulled off what Swiss rivals failed to: avoid major losses from the collapse of the family office-hedge fund.
Frankfurt-based Deutsche Bank swung to a net profit of 908 million euros ($1.1 billion) in the first quarter, from a loss of 43 million euros year-ago, it said in a statement on Wednesday. The result was powered by its investment bank, which is still feeding its business with revenue.
In doing so, the German bank largely avoided what is now more than $10 billion in losses from Archegos, which hit Credit Suisse the worst but didn’t leave UBS unscathed either. CEO Christian Sewing is now in his fourth year of reviving Deutsche Bank, following years of outsize risk-taking.
The bank had quickly offloaded roughly $4 billion in collateral against Archegos’ business before others. On Tuesday, Deutsche reported investment banking revenue surged by nearly one-third in the last three months, illustrating that Deutsche is still heavily reliant on Wall Street.
By contrast, revenue in its wealth management arm overseen by Claudio de Sanctis edged two percent lower. The unit won 7 billion euros of fresh money into investments products and lent 2 billion euros more to clients in the quarter.
Deutsche’s international private bank hiked overall assets to 267 billion euros, from 252 billion euros at year-end. The bank’s quarter overall represents its healthiest in seven years.
It comes against the backdrop of Credit Suisse sliding deeper into crisis: the Swiss bank took the biggest Archegos hit on Wall Street – 4.4 billion Swiss francs ($4.7 billion) – or nearly half the total which has surfaced publicly so far. UBS took a $774 million one, it reported on Tuesday, as well as another $87 million in the coming quarter.
Questions & Answers
Q.How did Deutsche Bank manage to avoid significant losses from the Archegos collapse?
How did Deutsche Bank manage to avoid significant losses from the Archegos collapse?
Deutsche Bank quickly offloaded roughly $4 billion in collateral against Archegos’ business before other banks did. This proactive step allowed them to largely sidestep the major financial impact that hit other institutions like Credit Suisse.
Q.What were Deutsche Bank’s financial results for the first quarter?
What were Deutsche Bank’s financial results for the first quarter?
The bank reported a net profit of 908 million euros ($1.1 billion) in the first quarter, a significant improvement from a 43 million euro loss in the same period last year. This marked its healthiest quarter in seven years.
Q.Which part of Deutsche Bank’s business primarily drove its recent positive financial performance?
Which part of Deutsche Bank’s business primarily drove its recent positive financial performance?
The investment bank largely powered Deutsche Bank's recent positive performance, with its revenue surging by nearly one-third in the last three months. This illustrates the bank's continued reliance on Wall Street activities.
Q.How much did other banks lose from the Archegos collapse?
How much did other banks lose from the Archegos collapse?
Credit Suisse took the biggest hit, losing 4.4 billion Swiss francs ($4.7 billion), nearly half the total publicised losses. UBS reported a $774 million loss, with an additional $87 million expected in the following quarter.
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