Deutsche Bank profit up 10%, defying expected decline, as investment bank booms

By Tom Sims and Matthias Inverardi

FRANKFURT, July 29 (Reuters) - Deutsche Bank reported a 10% jump in second-quarter profit on Wednesday, defying expectations for a drop, as strength at its global investment banking division offset a rise in expenses.

The profit gain was more muted than at some big U.S. and European competitors, which have also benefited from a trading boom in the wake of the Iran war, merger and acquisition deals and initial public offerings.

Germany's largest bank recorded net profit attributable to shareholders of €1.64 billion ($1.87 billion) in the quarter, up from €1.49 billion a year earlier, bettering analysts' expectations for a profit of €1.38 billion.

"We have upside to our 2028 targets," CEO Christian Sewing said.

The bank's shares opened 4% higher, and JPMorgan analysts called the results "strong across the board".

The figures extend a nearly uninterrupted return to quarterly profit over recent years, as Sewing stabilised one of the globe's most significant lenders.

Profit in the quarter was partly damped by an increase of 8% in expenses, among them a hit of nearly €100 million from the bank's exit from its retail business in India, announced at the end of June.

Deutsche Bank faces a potential big change in its home market as Italy's UniCredit moves closer to taking over Commerzbank, a top German competitor. However, its finance chief, Raja Akram, signalled it will not join its Italian rival in pursuing deals.

"We don't think we need M&A to become the bank that we need to become ... We don't really feel compelled to create a potentially disruptive situation for us in the short term," he told journalists.

Deutsche Bank's unexpected 10% profit jump still paled in comparison with a number of competitors, with the five biggest U.S. banks reporting increases of 50% on average, helped by booming share trading, a business Deutsche Bank exited years ago.

Deutsche's global investment bank remained the biggest revenue generator in the quarter, with revenue rising 19%, more than an expected 7.6% increase.

Within the investment bank, revenue at its fixed-income and currency trading business, one of the bank's largest, rose 16%, better than expectations for a 5.1% increase.

Such revenue was up 13% on average for the top five U.S. banks, ranging from 6% at JPMorgan to 32% at Goldman Sachs. Deutsche's division also outpaced European rivals Barclays and BNP Paribas.

Business including origination and advisory services was 36% higher, double the expected increase. Deutsche Bank was among the lenders helping with SpaceX's IPO and Alphabet's capital-raising.

Revenue at Deutsche's other two big divisions was more muted.

At the retail division revenue was up 8%, slightly ahead of expectations for a 7.3% rise. The corporate bank saw a 1% rise in revenue, while analysts had seen a drop of around 1.2%.

Deutsche Bank made headlines last week when German prosecutors searched its Frankfurt headquarters to investigate alleged fraudulent tax transactions at its Postbank division between 2008 and 2010.

It marked the third time that prosecutors are known to have searched Deutsche Bank this year. A case earlier this year related to money laundering, while one earlier in July was related to its retail bank.

Asked on Wednesday about the raids, CFO Akram said, "The entire management team continues to focus on delivery for Deutsche Bank."

($1=0.8772 euros)

(Reporting by Tom Sims and Matthias Inverardi; Editing by Kirsti Knolle, Clarence Fernandez and Tomasz Janowski)