By Tom Sims and Frank Siebelt
FRANKFURT (Reuters) -Deutsche Bank on Wednesday promised more share buybacks next year and said it may return more capital to investors than it had previously envisaged, sparking a jump in its shares.
The outlook on potential payouts came as Germany's largest lender posted a better-than-expected 8% drop in third-quarter profit and previewed staff cuts with the CEO saying "we will further reduce" jobs.
Revenue from investment banking slumped but grew in the lender's retail and corporate divisions on higher interest rates. Deutsche was also slightly more optimistic on its revenue outlook for the full year.
Deutsche Bank shares were up nearly 7% in midday Frankfurt trade as analysts cited positive news on potential buybacks and dividends.
In an unexpected move, Deutsche said it would potentially return more capital to investors than the 8 billion euros it had envisaged through 2025.
James von Moltke, chief financial officer, told journalists there was "upside" to the 8 billion, but "how much remains to be seen".
Analysts at Mediobanca (OTC:MDIBY) said the shares "should be rewarded for additional capital return".
Deutsche's net profit attributable to shareholders was 1.031 billion euros, beating the around 937 million expected by analysts.
Though earnings dropped, Deutsche recorded its 13th consecutive profitable quarter, a notable streak after years of hefty losses.
"These results demonstrate strong and sustained business growth momentum combined with continued cost discipline," CEO Christian Sewing said.
He also told analysts staff reductions were in the offing: "We have seen the peak in our workforce and we will further reduce."
The earnings come as the investment bank faces uncertain business prospects in the coming quarters and as the retail division draws the scorn of regulators after it botched the integration of its Postbank arm, leaving customers complaining that they were locked out of their accounts and unable to reach call centres.
The bank's retail business was again the biggest revenue generator. Analysts expect the unit, which is undergoing a strategy review under new leadership, will 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 4%, better than an expected 5% drop. A 21% increase in revenue at the corporate bank slightly beat expectations and the retail division's 3% rise came in below forecasts of 5%.
Revenue for fixed-income and currency trading, one of the bank's largest businesses, fell 12% after a strong year-ago quarter as lower market volatility dampened clients' enthusiasm for trading.
In comparison, similar trading at Goldman fell 6% in the quarter, while JPMorgan's was up by 1%. Barclays reported a 13% fall in such revenue.
Deutsche's origination and advisory business was a bright spot, with revenue tripling to 323 million euros from a very low level a year earlier.
Analysts with RBC capital markets called the earnings "mixed" in a note to investors.
($1 = 0.9433 euros)