Deutsche Bank posted on Thursday (Apr 25) a better-than-expected 10 per cent increase in first-quarter profit as a resurgence in fixed-income trading and deal-making propelled revenue at its investment banking division.

The gains mean investment banking was able to reclaim its position as Deutsche’s biggest breadwinner from its giant retail division that had recently benefited from higher interest rates but suffered from customer service glitches.

The group’s figures marked the 15th consecutive quarter of profit – a considerable streak in the black for Deutsche after hefty losses during the last decade.

Net profit attributable to shareholders was 1.275 billion euros (S$1.859 billion) in the quarter. That compares with a profit of 1.158 billion euros a year earlier, and it was better than analyst expectations for profit of around 1.2 billion euros.

“These results represent another step forward,” chief executive officer Christian Sewing said in a note to staff.

He said the bank remained committed to its 2025 goals, which include a decline in its cost-to-income ratio that analysts believe may be too ambitious.

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Despite the bank’s better-than-expected earnings, Deutsche is navigating a weak economy in its home market, even if German business morale has improved.

And regulators have warned that 2024 will be less rosy for German bank profits as a property crisis weighs and loans go bad.

Deutsche’s investment banking revenue rose 13 per cent during the quarter, better than the 6.9 per cent rise expected by analysts. A 5 per cent drop in revenues at the corporate bank missed expectations for a 3.5 per cent fall, and the retail division’s 2 per cent revenue decline came in as forecast.

Revenue for fixed-income and currency trading, one of the bank’s largest businesses, rose 7 per cent from a weak quarter a year earlier. That beat expectations for a 2.6 per cent gain and was ahead of a 3 per cent drop by the biggest US banks.

Origination and advisory was a bright spot, with revenue rising 54 per cent, compared with expectations of a 36 per cent increase and outpacing gains of 25 per cent among big US competitors.

Analysts now expect the investment bank to remain Deutsche’s biggest income generator through 2026. That is a shift in expectations from last year, when analysts forecast the retail bank would dominate.

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.

The retail division, while benefiting from higher interest rates and the income that provides, had drawn the scorn of regulators after it botched the integration of its Postbank arm, leaving customers complaining that they were locked out of their accounts and unable to reach call centres.

Now, the European Central Bank is expected to begin cutting interest rates, resulting in less income generated from the difference between what banks earn on loans and pay out on deposits.

Deutsche, whose share price has lagged other big European banks, recently got a vote of confidence, winning a new top investor.

In the quarter a year earlier, the bank’s shares had dropped 15 per cent in a single day on fears of contagion after banks had to be rescued in the United States and in Switzerland.

The turmoil caused investors to panic and customers to withdraw deposits, prompting a rare intervention by Germany’s Chancellor Olaf Scholz, who said: “There’s no reason to worry.”

Now Deutsche Bank is contending with fallout from commercial real estate, which has come under pressure in the United States and Germany.

The bank forecast last month that it expects the current crisis in commercial real estate to continue in 2024 and that provisions for loan losses will be at the upper end of its projected range. REUTERS