Deutsche Bank admits it faces a long and painful road to rehabilitation.
"The issue we have is we have to get an awful lot done this year," Co-CEO John Cryan told investors as the bank reported earnings on Thursday. "A bigger profit might be a hallmark of us not having achieved what we want to achieve."
Given that, investors should be troubled by the bank's better-than-expected results.
First-quarter profit of 214 million euros ($242 million) beat analyst estimates, thanks largely to the Postbank consumer arm and the non-core unit performing less badly than expected.
Ignore the fact that the lender had already managed analysts' expectations downward -- net was down about 61 percent from the same period a year ago (when results were hit hard by major litigation costs.)
Revenue fell 22 percent, with all major business segments in decline: global markets revenue was down 23 percent. Corporate and investment banking revenue fell 15 percent. Commercial banking and wealth management income were also down.
Just as at other banks, the declines were the result of "challenging" markets that led to lower client activity. The added complication for Deutsche Bank is that its managers are trying to engineer a broad restructuring in an environment that they themselves admit is likely remain poor for the rest of 2016.
Cryan hasn't yet offered much in the way of a grand vision for Deutsche Bank in the long-term. For now, the bank is mostly focused on fixing three key areas.
First: capital. There, progress so far has been slow. The bank's Common Equity Tier 1 capital ratio fell to 10.7 percent from 11.1 percent at the end of 2015.
The sale of a stake in Hua Xia bank, scheduled to close any time now, should help. A disposal of Postbank, likely not till next year, should also provide a boost. But weak earnings aren't adding much, and CFO Marcus Schenck said that "de-risking" in the non-core unit was going slower than planned.
Second: Legal costs. Cryan's team say they're optimistic they will settle the bank's outstanding big litigation this year. There, provisions declined only slightly to 5.4 billion euros from 5.5 billion euros.
One potentially significant legal claim that lingers relates to Russia -- the bank's handling of so-called mirror trades is under investigation by prosecutors in Europe and America. Deutsche Bank has said in the past that it has tightened controls and taken disciplinary measures related to this issue. But, unlike in some other areas, there is less precedent for how authorities will proceed and the size of any potential settlement.
Finally, Cryan wants to bring down the lender's costs. Here, again, there's not much to show for the bank's efforts so far. The cost-income ratio rose to 89 percent in the quarter from 84 percent in the year-earlier period. In absolute terms, non-interest expenses fell 1.3 billion euros to of 7.2 billion euros -- but that shrinkage is mostly due to 1.5 billion euros of litigation costs that were booked in the first quarter of 2015.
Cryan is only part way to proving he's an effective repair-man. He needs to if he's to revive the bank's valuation, which remains the lowest among its global peers. But he's much further away from demonstrating he's a capable builder.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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