Deutsche Bank said it hopes to benefit from Swiss rival UBS's retreat, as its investment bank delivered record third-quarter revenue and helped lift group profit by 20 percent.
Germany's largest bank increased its job loss target by nearly 100 to 1,993 staff, part of an industry-wide retrenchment as banks slash costs in a bid to increase returns as tougher regulations squeeze margins.
But Deutsche Bank also said on Tuesday it would seek to mop up business from UBS which is firing 10,000 bankers and winding down its fixed-income operations, an area of strength for the Frankfurt-based lender.
"We have told you that we anticipate that some competitors will leave. That is traditionally what happens in these areas of consolidation," Deutsche Bank Chief Financial Officer Stefan Krause told analysts on Tuesday. "As a leader in fixed income, a reduction in capacity is a good thing," Krause added.
For Deutsche Bank, revenue from sales and trading of debt products, such as bonds and derivatives, jumped 67 percent, a record level for the third quarter. That helped Deutsche's Corporate Banking and Securities unit, the core of its investment bank, deliver 662 million euros of the bank's total 1.13 billion euros in pretax profit.
Deutsche Bank shares were up 4 percent at 34.64 euros at 1108 GMT, outpacing European bank stocks <.SX7P> which were 1 percent higher.
Christian Muschick, an analyst at Silvia Quandt research said: "The development in investment banking is a positive surprise. In many areas of investment banking Deutsche is in the top three, and therefore in a better position than UBS."
A move by the European Central Bank to pacify markets at the end of July helped fuel a boom in debt issuance, which benefited banks with large fixed-income businesses like Deutsche and rivals Nomura <8604.T> and Morgan Stanley .
Year-to-date, Deutsche Bank is in second place globally among the bookrunners for global debt, behind J.P. Morgan , Thomson Reuters data released on October 25 show.
Retail banking contributed another 492 million euros to Deutsche's pretax profit, helping to offset 276 million euros in restructuring expenses and a 20 percent jump in loan loss provisions.
The bank unveiled an overhaul in September in a bid to save 4.5 billion euros by 2015. Around 40 percent of cost savings will come from cuts to real estate and information technology.
CFO Krause said on Tuesday the majority of job cuts will be completed by the year-end, adding that 1,200 of the total 1,500 job losses at the investment bank had already been completed. The cuts represent about 15 percent of investment banking staff.
Deutsche is cutting about 2 percent of its total workforce. Some 814 jobs are going within Corporate Banking & Securities, and 562 from Asset and Wealth Management. A remaining 617 jobs will be cut from infrastructure functions which were primarily supporting Corporate Banking & Securities, Deutsche Bank said.
The bank has earmarked 222 million euros for termination payments.
The bank improved its core tier one ratio to 10.7 percent, mainly by shedding risky assets. At the end of the second quarter the bank's core tier one ratio was 10.2 percent.
Deutsche Bank's third-quarter net income was stable at 755 million euros, beating a forecast 666 million in a Reuters poll of analysts.
(Additional reporting by Andreas Kroener and Sarah White in London; Editing by Erica Billingham)