Deutsche Bank, Germany's biggest bank, reported a better-than-expected 9% rise in net profit in the first quarter of 2023. The bank's earnings were boosted by income from higher interest rates, which helped offset a slump in revenues at the investment bank. The bank's net profit attributable to shareholders was €1.158 billion ($1.28 billion), up from €1.060 billion a year earlier and better than analysts' expectations for a profit drop to around €977 million.
Deutsche Bank CEO Christian Sewing credited the bank's stability to the hard work of its employees. However, analysts warn that the bank remains vulnerable to a slowing economy, high inflation, war on the continent, and regulatory issues that have plagued the bank over the years.
To further reduce costs and improve profitability, Deutsche Bank has announced a major revamp of its management board, which includes changes to those overseeing its giant retail business and its U.S. operations, a critical hub for the sprawling global investment bank.
In 2019, Deutsche Bank set out to reduce its 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. While the bank's recent earnings suggest that the tides have turned, revenue at the investment bank unit fell 19% to €2.7 billion in the first quarter from a year earlier, below expectations of €2.8 billion. Revenue for fixed-income and currency trading, one of the bank's largest divisions, fell 17% to €2.360 billion.
However, gains at the corporate bank and retail bank, which saw 35% and 10% increases, respectively, helped to counterbalance the investment bank's revenue decrease. These divisions had long stagnated under ultra-low interest rates that lasted longer than expected.
Deutsche Bank's aim with the management board reshuffle is to achieve "sustainable profitability." Whether this goal will be achieved remains to be seen, as the bank continues to facea challenging operating environment.
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