Deutsche rises after gain on cost reduction

Bloomberg

Deutsche Bank AG was the best performer among European lenders after reporting a surprise profit in the first quarter as legal expenses dropped and trading businesses performed better than analysts forecast.
Net income declined to 214 million euros from 544 million euros in the year-earlier period, the company said in a statement on Thursday. Analysts had forecast a loss of 484.3 million euros, according to the average of six estimates compiled by Bloomberg. Estimates ranged from a profit of 244 million euros to a loss of 1.44 billion euros.
Co-Chief Executive Officer John Cryan, 55, is making progress in restoring investor confidence in the lowest-valued major global lender after pledging to eliminate 9,000 jobs, offload riskier assets and scrap dividends as part of a wider overhaul to revive profit growth. Still, Deutsche Bank may post another loss this year, the co-CEO said on Thursday, hurt by restructuring costs and charges tied to past misconduct.
“Deutsche Bank is one of the biggest restructuring stories in the Western hemisphere,” Filippo Alloatti, a senior credit analyst at Hermes Fund Managers Ltd., said in an interview with Bloomberg Television’s Anna Edwards on Thursday. “There’s still a very long road ahead. I think we can start to see the benefits of the restructuring soon.”
The shares rose as much as 5 percent and were up 2.1 percent at 17.06 euros at 10:56 a.m. in Frankfurt, making them the best performer on the Bloomberg Europe 500 Banks And Financial Services Index, which slipped 2 percent. They have dropped about 24 percent this year, while Credit Suisse Group AG, which is also shrinking its riskiest businesses, has lost 32 percent in that period.
Net revenue fell to 8.1 billion euros from 10.4 billion euros a year earlier, while risk-weighted assets slipped 7 percent to 401 billion euros. The cost-to-income ratio, a measure of profitability, was 89 percent, worse than 84 percent a year earlier.
“At the moment it’s unclear to us whether we’ll make a small loss or a small profit but it’s looking as though we’re on the cusp,” Cryan said on a call with analysts on Thursday. “To some extent, the lower the profits or if we have a marginal loss, it could be the
hallmark of success.”
A bigger profit may be a hallmark of us not having achieved doing a lot of what we wanted to achieve.”