Deutsche Bank posts surprise profit in the first quarter

Deutsche Bank posted a surprise profit in the first quarter as legal expenses dropped and the company's trading businesses performed better than analysts had expected.

Net income declined to €214 million from €544 million in the year-earlier period, the company said in a statement on Thursday.

Analysts had forecast a loss of €484.3 million, according to the average of six estimates compiled by Bloomberg.

The estimates ranged from a profit of €244 million to a loss of €1.44 billion.

Co-chief executive officer John Cryan, under pressure to restore investor confidence in the lowest-valued major global lender, has pledged to eliminate 9,000 jobs, offload riskier assets and scrapped dividends as part of a wider overhaul.

With mounting costs tied to past misconduct, rising restructuring charges and tougher capital requirements weighing on returns, the co-CEO said last month he doesn’t expect Germany’s largest bank to be profitable this year.”

As you know, business conditions were challenging during the quarter, particularly in January and February, as financial market participants reacted to concerns about the outlook for the global economy -- these are reflected in our results,” Cryan and co-CEO Juergen Fitschen said in a statement.

“The economic and financial market outlook remains uncertain. But as you can see we are making progress on many fronts.”Deutsche Bank shares have dropped 26 percent this year.

At Credit Suisse, which is also shrinking its riskiest businesses, the shares have lost 31 per cent of their value in that period, while the Bloomberg Europe Banks and Financial Services Index slipped 15 per cent.

Mr Cryan’s overhaul has been complicated by record-low interest rates, volatile markets and plunging commodity prices eroding earnings at the securities business, led by Garth Ritchie.

The five largest US investment banks saw their combined trading revenue drop 22 per cent in the first quarter, with Barclays on Wednesday reporting a 31 percent drop in underlying pretax profit at the corporate and investment banking unit.

Deutsche Bank’s debt-trading revenue, its largest source of income, fell 29 per cent to €2.8 billion on a “challenging market environment” and as the company exited businesses such as capital-intensive securitized products.

The average of 11 analyst estimates compiled by the company forecast a drop to €1.89 billion.

Bloomberg