FRANKFURT (dpa-AFX) - Deutsche Bank is tightening its austerity measures despite its best start to the year since 2013. To drive profits further up, costs are to be cut even more sharply than previously targeted, the Frankfurt-based group announced on Thursday. Plans include "strict hiring restrictions in non-customer-facing areas," a "targeted reduction of jobs at management levels," the "streamlining of the construction financing business" and the further downsizing of the technology center in Russia.

On the stock market, the news recently caused share price gains. The Deutsche Bank share recently gained 2.8 percent after some sharp price fluctuations. The share was thus one of the clearest winners on the Dax.

Industry expert Kian Abouhossein of U.S. bank JPMorgan called Deutsche Bank's figures mixed. The corporate banking business was strong, but investment banking and retail banking were weaker than expected, he said. Analyst Chris Hallam of Goldman Sachs, on the other hand, said he was positively surprised by the level of earnings and the cost-to-income ratio.

In the first quarter, the pre-tax profit of Germany's largest bank increased by twelve percent compared to the first three months of the previous year to a good 1.85 billion euros. According to Deutsche Bank, this is the highest quarterly result in ten years. The bottom line was a surplus of around 1.16 billion euros for shareholders, compared with 1.06 billion a year earlier.

Overall, the results showed that the bank is well on track to "meet or exceed" the targets set by the Management Board for 2025, Group CEO Christian Sewing said. "We want to implement our strategy even faster through the additional measures announced today." The additional cost savings are now expected to total 2.5 billion euros, compared with a previous target of 2.0 billion. In areas not directly related to customers, around five percent of management jobs are to be eliminated. This involves around 800 people, Sewing explained in a conference call.

Deutsche Bank had already announced on Wednesday evening that the Management Board would be reduced from ten to nine members. In addition to head of private clients Karl von Rohr, who is leaving at the end of October, Christiana Riley, the board member responsible for the Americas business, is also leaving. She will leave the company at the Annual General Meeting on May 17. Claudio de Sanctis will be the new head of Private Customers from November 1 at the latest.

On the subject of mortgage lending, CFO James von Moltke referred in the conference call to the drop in demand for real estate loans in the face of higher interest rates. He said the bank would be "modestly restrained" in granting construction loans - partly because the financial regulator Bafin has been imposing a new capital buffer for residential real estate loans on financial institutions since the spring. However, construction financing remains "an absolutely key product in our customer relationship," von Moltke assured.

Deutsche Bank owes its surprisingly good performance in the first quarter not least to the significant rise in interest rates. Net interest income jumped by almost a fifth to 3.4 billion euros. Although income from the in-house investment bank slumped compared with the unusually strong prior-year period, the Group's total income grew by five percent to just under 7.7 billion euros. Meanwhile, the bank set aside 372 million euros for impaired loans. That was a good quarter more than a year earlier, when the Russian war of aggression against Ukraine had just begun and thrown the global economy into turmoil.

Among the Group's divisions, only the in-house corporate bank was able to increase its pre-tax profit: at 822 million euros, it actually generated more than three times as much as a year earlier. In the investment bank, however, pre-tax profit slumped by 42 percent, and in the retail bank it fell by 29 percent due to higher risk provisioning for impaired loans abroad. The fund subsidiary DWS generated pre-tax profits of 115 million euros, just over half as much as in the same period last year.

After the Dax group posted its highest profit in 15 years in 2022, shareholders can expect a share buyback program in addition to a dividend in the near future. "In view of the good first-quarter results and the further improvement in capital ratios, management has initiated a dialogue with regulators on share buybacks in the current year," the bank said. Management estimates that the buybacks are likely to start in the second half of 2023./ben/stw/jha/