Deutsche Bank leans on M&A boom as trading slows

Deutsche Bank relied on the boom in mergers and acquisitions to offset a drop in trading revenues last quarter, as Germany’s biggest bank reported better than expected profits.

Revenue from advising on deals, as well as helping companies issue new debt and equity, rose 22 per cent from the same period last year. Trading revenues dropped 12 per cent, though that decline was smaller than feared.

Like most of its rivals, Deutsche’s bottom line also benefited from a steep decline in provisions for bad loans related to the pandemic. As a result, net profits at the bank rose 7 per cent in the third quarter to €194m, beating analyst expectations of €135m.

“Our revenues have proven to be resilient,” chief executive Christian Sewing said in a statement on Wednesday, reiterating that the lender was “confident” it could reach its 2022 targets on revenue, costs and profitability.

A sustained boom in M&A, however, was not enough to prevent overall revenues at the investment bank falling 6 per cent in the quarter from a year ago, as trading in fixed-income slowed. Deutsche quit equities trading in 2019 as part of Sewing’s three-year turnround plan.

Revenue at Deutsche’s corporate bank was flat compared with a year ago, while the retail bank reported a 2 per cent decline. Its asset management revenues were a bright point, increasing 17 per cent.

Deutsche’s common equity tier 1 ratio — a key benchmark for balance sheet strength — fell 0.3 percentage points to 13 per cent. Its cost-income ratio, which Sewing has promised to bring down to 70 per cent by the end of next year, was 1.6 percentage points higher than a year ago at 88.9 per cent.

Employee numbers at the lender, which Sewing two years ago promised to cut by almost a fifth to 74,000, reached 84,500 at the end of the quarter.

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