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The moon shines next to the Deutsche Bank headquarters in Frankfurt, Germany, on Oct. 4, 2020.

Michael Probst/The Associated Press

Deutsche Bank posted a better-than-expected net profit for the first quarter, driven by its investment banking activities which outperformed major U.S. rivals.

The German lender on Wednesday reported a first-quarter net profit attributable to shareholders of 908 million euros ($1.1 billion) versus a year-earlier loss of 43 million. That beat consensus profit expectations of around 600 million euros.

It was the strongest quarter for Deutsche since the first quarter of 2014, as revenue at its fixed-income trading business and origination and advisory services surged, trends that have also lifted profits of competing banks.

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Deutsche said it now expects revenue to be essentially flat in 2021 compared with a previous estimate of marginally lower. The shares traded 6.6 per cent higher at 0846 GMT in Frankfurt. The bank had hoped to trim costs to 18.5 billion euros for 2021 but additional costs of around 400 million euros in bank levies and a German deposit protection scheme following the collapse of Greensill Bank, the lender owned by insolvent UK finance firm Greensill, could make that difficult to achieve.

The profit figures were good news for Chief Executive Christian Sewing, who embarked on a radical restructuring two years ago that involved shedding 18,000 staff in an effort to return the bank to profitability.

“These results give us confidence that we’ll reach our 2022 targets,” Sewing said in a statement.

Michael Rohr, analyst with ratings agency Moody’s, said the bank’s results “propel its profitability to a new level.”

Analysts at Citigroup called it “an impressive quarter” but kept a “sell” rating as they predict the bank will miss a key profitability target - an 8 per cent return on tangible equity in 2022.

The investment bank’s resilience helped Deutsche eke out a small profit for 2020, its first after five years of losses.

Questions remain about the sustainability of the investment banking boom, but analysts expect Deutsche to deliver another profit in 2021, a consensus forecast of their estimates shows.

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“The trajectory we are on is significantly ahead” of last year, finance chief James von Moltke told journalists when asked about profit for 2021.

Deutsche’s key fixed-income and currency sales and trading business, with revenue up 34 per cent at nearly 2.5 billion euros, marked its best quarter since 2015.

That growth is better than some U.S. investment banks. Goldman Sachs reported a 31 per cent rise in such trading in the first quarter, while those at JPMorgan were up 15 per cent.

Origination and advisory services revenue at Deutsche, up 40 per cent, showed its best quarter since 2017. That was partly due to its business in Special Purpose Acquisition Companies (SPACs). Asset management revenue rose 23 per cent.

Low interest rates and a slowdown in global trade pressured revenue at Deutsche’s other divisions, such as those for corporate and retail clients, where revenue stagnated.

In a sign the bank sees itself over the hump of the coronavirus pandemic, it expects risk provisions for credit losses of around 1.1 billion euros this year, down from 1.8 billion last year.

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“It remains to be seen if that will be enough,” Klaus Nieding of the shareholder lobby group DSW said.

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