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Deutsche Bank Flags Cost Cuts as Investment Bank Slump Lowers Profit

FRANKFURT, July 26 (Reuters) - Deutsche Bank posted on Wednesday a 27% fall in second-quarter profit as investment banking revenues slumped and warned of the need for cost cuts even though higher interest rates fuelled gains at its retail division.

The German lender downgraded its outlook for the investment bank, saying it now expected revenues to be slightly lower in 2023, compared to a previous forecast for flat revenue, though it was slightly more optimistic for the broader bank's full-year revenue potential.

The figures underscore broader trends in global banking, with investment banks struggling as deals are paused, while higher interest rates are a boon to other divisions.

Deutsche CEO Christian Sewing in a memo to staff said "tough decisions" were needed on costs.

"We are operating in an environment with significantly rising prices, which is another reason why we must maintain rigid discipline when it comes to our costs," he said.

The bank announced cuts to 800 mostly non-client facing roles in April and is also drawing up plans to cut 10% of its 17,000 German retail jobs over the next few years, Reuters reported last month.

Deutsche faced a rise in non-operating costs in the quarter, partly as a result of higher litigation and severance charges.

The bank's retail division became its biggest revenue generator during the quarter. Analysts expect the retail unit will also overtake the investment bank as the main revenue driver for the full year, overturning the investment bank's pole position over the previous three years.

Investment banking revenue dropped 11% during the quarter, better than an expected 16% drop. A 25% increase in revenues at the corporate bank slightly beat expectations and the retail division's 11% rise came in as forecast.

Net profit attributable to shareholders was 763 million euros ($843.04 million), down from 1.046 billion euros a year earlier but better than analyst expectations for profit of around 571 million euros.

Despite the profit drop, the earnings marked the bank's 12th consecutive quarter of profit, a notable streak in the black after years of losses.

($1 = 0.9051 euros)

Reporting by Tom Sims and Matthias Inverardi; Editing by Friederike Heine and Jamie Freed

Source: Reuters

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