Deutsche Bank posts better-than-expected profit; flags job cuts

Deutsche Bank (DBKGn.DE) reported a better-than-expected 9 per cent rise in first-quarter profit on Thursday as income from higher interest rates offset a slump in revenues at the investment bank, and flagged job cuts as it looks to further reduce costs.

Net profit attributable to shareholders was 1.158 billion euros ($1.28 billion). That compared with profit of 1.060 billion euros a year earlier, and was better than analysts’ expectations for a profit drop to around 977 million euros.

The results marked the 11th consecutive quarter of profit at Germany’s biggest bank, making for the longest streak in the black in at least a decade.

“We have worked hard to achieve this stability,” Deutsche Bank Chief Executive Officer Christian Sewing told employees in a memo.

It reported a 19 per cent drop in investment banking revenue that was worse than expectations. By contrast, revenue at the corporate bank and retail divisions beat expectations.

The bank said there would be an unspecified number of job cuts in non-client facing staff as one of several measures to further cost reductions in the years ahead. It said it would begin reducing “senior non-client facing” staff by 5 per cent during the second quarter.

Deutsche generated the earnings during an unsettling period for global finance, a quarter when banks were rescued on both sides of the Atlantic – in the United States and in Switzerland. The turmoil caused investors to panic and customers to withdraw deposits, and the aftermath is continuing.

In the wake of those rescues, Deutsche suffered a 15 per cent decline in its share price during a single day as fears of contagion spread, spooking global markets and prompting rare support from Germany’s Chancellor Olaf Scholz. “There’s no reason to worry,” he said.

Shares have since stabilized, though deposits dropped 5 per cent in the first quarter from the end of last year.

Still, analysts say the bank, which ranks as one of the world’s most systematically important, is vulnerable to a slowing economy, high inflation, war on the continent, and regulatory issues that have plagued the bank over the years.

In recent days, Deutsche has announced a major revamp of its management board that includes changes of those overseeing its giant retail business and its US operations, a critical hub for the sprawling global investment bank.

The aim of the reshuffle, according to Deutsche’s chairman, is “sustainable profitability”.

Deutsche Bank set out in 2019 to reduce dependence on its volatile investment bank and rely instead on more stable businesses that serve companies and retail customers as a way to restore profitability.

It didn’t quite turn out that way, though recently the tides have turned, further underscored by Thursday’s figures.

Revenue at the investment bank unit fell 19 per cent to 2.7 billion euros in the first quarter from a year earlier. That is below expectations of 2.8 billion euros.

The investment bank’s origination and advisory business stood out, with revenue dropping 31 per cent, mirroring slumps at other banks like JPMorgan and Goldman Sachs.

Revenue for fixed-income and currency trading, one of the bank’s largest divisions, fell 17 per cent to 2.360 billon euros. Analysts had expected 2.5 billion euros in revenues.

The investment bank’s revenue decrease was countered by gains at the corporate bank and retail bank, which saw 35 per cent and 10 per cent increases. The divisions had long stagnated under ultra-low interest rates that lasted longer than expected.

($1 = 0.9050 euros)