Deutsche Bank profits rise as trading business booms

Germany’s largest lender has beaten market expectations after volatile trading and a revival in corporate dealmaking drove strong growth at its investment bank

Deutsche Bank has reported a 10 per cent rise in quarterly profit as increased trading and advisory revenues helped it overcome higher operating expenses.

Net profit attributable to shareholders rose to €1.64 billion in the three months to the end of June, up from €1.49 billion during the same period last year.

The result was comfortably ahead of the €1.38 billion forecast by analysts and sent the German lender’s shares more than 3 per cent higher on Wednesday morning.

Profit after tax across the group reached €1.9 billion, the bank’s highest recorded total for a second quarter, while pre-tax profit increased by 11 per cent to €2.7 billion.

Revenues rose by 9 per cent to €8.5 billion, taking Deutsche Bank’s first-half revenues to €17.2 billion. Profit after tax for the first six months of the year increased by 9 per cent to a record €4.1 billion.

Much of the improvement came from the bank’s investment-banking division, where revenues increased by 19 per cent.

Income from fixed-income and currency trading rose by 16 per cent, compared with an increase of about 5 per cent expected by analysts.

Revenue from origination and advisory work – which includes arranging mergers, company flotations and corporate fundraising – increased by 36 per cent as activity returned to global capital markets.

Pre-tax profit at the investment bank rose by 59 per cent to €1.3 billion, accounting for almost half of Deutsche Bank’s group total for the quarter.

Chief executive Christian Sewing said the strength of the first-half performance had increased confidence that the bank could outperform the financial objectives it has established for 2028.

“We have upside to our 2028 targets,” he said.

The results continue the recovery overseen by Sewing, who took control of Deutsche Bank in 2018 following years of losses, regulatory penalties and repeated restructuring.

The bank has since reduced its reliance on some of its riskier activities, withdrawn from share trading and concentrated its investment bank more heavily on bonds, currencies, corporate finance and advisory work.

That strategy has left Deutsche Bank well placed to benefit from increased fixed-income trading but with less exposure to the surge in equities revenues enjoyed by several large banks in the United States.

Although its fixed-income performance compared favourably with competitors, profits at the five largest U.S banks rose by an average of about 50 per cent during the quarter, against Deutsche Bank’s 10 per cent increase.

European banks continue to operate at a disadvantage to their U.S competitors because of the continent’s more fragmented financial market and differing national regulations.

Deutsche Bank also trades at a lower valuation than many major U.S lenders and some European banks with a greater concentration on domestic retail and commercial banking.

Growth outside its investment bank was more restrained.

Revenue at its private bank increased by 8 per cent. Corporate-bank revenue rose by 1 per cent, although this was stronger than the small decline analysts had anticipated.

The increase in earnings was accompanied by higher costs, including a charge of almost €100 million connected with Deutsche Bank’s withdrawal from retail banking in India.

The lender nevertheless announced plans for a further €500 million share buyback after completing a previous €1 billion programme.

Its return on tangible equity – a closely watched measure of profitability against shareholder capital – rose to 11 per cent during the quarter.

The results come amid further consolidation within European banking, including UniCredit’s attempt to increase its control over Commerzbank, one of Deutsche Bank’s principal domestic competitors.

However, finance chief Raja Akram told Reuters that Deutsche Bank did not need a major acquisition to achieve its growth plans.

“We don’t think we need M&A to become the bank that we need to become,” he said.

“We don’t really feel compelled to create a potentially disruptive situation for us in the short term.”

The earnings announcement also followed another search of Deutsche Bank’s Frankfurt headquarters by German prosecutors.

The latest investigation concerns suspected fraudulent tax transactions involving its Postbank subsidiary between 2008 and 2010. It was the third known search involving the lender this year, following separate investigations relating to money laundering and its retail operations.

Asked by Reuters about the searches, Akram said: “The entire management team continues to focus on delivery for Deutsche Bank.”

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