Frankfurt, April 27 (BNA): Deutsche Bank reported a better-than-expected 9% rise in first-quarter profit Thursday, as income from higher interest rates offset falling revenue at the investment bank, and announced job cuts. Looking forward to further reducing costs.
Net profit attributable to shareholders was 1.158 billion euros ($1.28 billion). This compared to a profit of 1.060 billion euros in the previous year, and it was better than analysts’ expectations of a decrease in profits to about 977 million euros.
The results mark the 11th consecutive quarter of earnings at Germany’s largest bank, making it the Lions’ longest streak in at least a decade, Reuters reports.
“We have worked hard to achieve this stability,” Deutsche Bank CEO Christian Swing told employees in a note.
It reported a 19% drop in investment banking revenue that was worse than expected. By contrast, revenues in the banking and retail business divisions beat expectations.
The bank said there will be an unspecified number of job cuts in non-customer-facing staff as one of several measures to further cut costs in the coming years. It said it would begin cutting “senior non-customer” employees by 5% during the second quarter.
Deutsche made profits during a turbulent period for global finance, a quarter of which were bailed out by banks on both sides of the Atlantic – in the United States and Switzerland. The turmoil caused investors to panic and customers to withdraw their deposits, and the consequences are still continuing.
In the aftermath of those bailouts, Deutsche suffered a 15% drop in its share price in a single day as fears of contagion spread, spooking global markets and spurring rare support from German Chancellor Olaf Scholz. He said, “You don’t have to worry.”
Stocks have leveled off since then, though deposits fell 5% in the first quarter from the end of last year.
However, analysts say the bank, which ranks as one of the most systemically important banks in the world, is vulnerable to a slowing economy, rising inflation, war on the continent and regulatory issues that have plagued the bank over the years.
In recent days, Deutsche announced a major revamp of its board that includes changes to those who oversee the retail giant’s business and its operations in the United States, an important center for the sprawling global investment bank. The goal of the reshuffle, according to the Deutsche chairman, is “sustainable profitability”.
Deutsche Bank set out in 2019 to reduce reliance on the volatile investment bank and instead rely on a more stable business serving corporate and retail clients as a way to restore profitability.
It hasn’t quite played out that way, though the tides have turned recently, which Thursday’s numbers confirmed.
Revenue from the investment bank unit fell 19 percent to 2.7 billion euros in the first quarter compared to a year earlier. This is lower than expectations of 2.8 billion euros.
The investment bank’s advisory and founding business marked out, with revenue down 31%, reflecting sluggishness at other banks such as JPMorgan and Goldman Sachs.
Revenue from fixed income and currency trading, one of the bank’s largest divisions, fell 17% to 2.360 billion euros. Analysts had expected revenues of 2.5 billion euros.
The decline in investment bank revenue was offset by gains in the corporate bank and retail bank, which saw increases of 35% and 10%. The divisions stagnated for a long time with ultra-low interest rates lasting longer than expected.
($1 = 0.9050 euros)