Deutsche Bank, HSBC Flag Tariffs Impact as Provisions Climb

(Bloomberg) — First-quarter results at Deutsche Bank AG and HSBC Holdings Plc offered an early glimpse of how two of Europe’s biggest lenders are responding to the trade war roiling markets.

The German lender added €70 million ($80 million) to its provisions in the first quarter specifically to reflect concerns over tariffs and the macroeconomic picture, Chief Financial Officer James Von Moltke said on an earnings call Tuesday. Credit provisions overall for the quarter rose to €471 million, ahead of estimates. 

The charge arose after Deutsche Bank’s modeling applied more conservative parameters for clients particularly exposed to tariffs, Von Moltke said.  A “more negative” set of macroeconomic assumptions was also used.

As part of its $900 million charge for the quarter, HSBC said it took a $150 million hit to reflect heightened economic uncertainty. The bank would have taken a further $500 million charge if its downside scenario for a slowdown in global growth as a result of higher tariffs was modeled at 100% probability rather than 25%.

CEO Georges Elhedery said the bank had performed a series of stress tests on its revenue streams and credit portfolios to satisfy itself about the likely impact of a more severe economic downturn caused by tariffs.

“We have looked at a differentiated approach on various countries’ GDPs, various trade corridors or corridors between various trading blocs and the potential tariffs implications,” he said on a call with reporters.

The numbers suggest lenders have weathered the turmoil so far — albeit for a period before US President Donald Trump’s April 2 “Liberation Day” launch of a series of tariffs against trading partners. Elhedery said that at present the bank expected the fallout to be relatively muted as he pointed to a low single-digit impact on revenues and no change to the lender’s financial targets. 

Still, both banks also stressed the additional risks that tariffs pose to their outlooks even as they reaffirmed 2025 targets with Deutsche Bank flagging the “high levels of uncertainty regarding the U.S. administration’s tariff policy” could have a material impact on its assumptions.

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