On the surface, Deutsche Bank's results this morning came in better than expected with first quarter earnings more than doubling as Germany’s biggest bank benefited from a pick-up in market activity at the start of the year. In the three months to March, Deutsche managed to make a net profit of €575m, more than double from €236m in the same period a year earlier, when market were shaken by concerns over Deutsche’s viability, and above consensus estimates of €522m.

However, not only did revenues fall 9% to €7.3bn, largely the result of an accounting effect known as debt-valuation adjustment, or DVA, but a more careful read of the report thru explains why DB stock is down 3%, after tumbling as much as 3.9% earlier in the session - the most in 5 weeks - making it the second biggest decliner in 46-member SX7P after Popular.

As Bloomberg points out, Europe’s largest investment bank on Thursday reported an 11% increase in FICC revenue, less than half the 24% jump in the combined fixed income revenue at the five biggest U.S. investment banks. Income from dealing in stocks, which the firm has sought to expand because of its lower capital requirements, declined 10 percent while it was broadly flat at the U.S. lenders, which appear to have taken significant market share from the German banking giant.

At the securities unit, revenue from both rates and credit trading rose last quarter while foreign exchange business saw income fall from a year earlier in a “low volatility environment.” Emerging markets revenues were flat across the Latin America and central and eastern Europe, the Middle East and Africa regions. The bank said that while cash equity and equity derivatives revenue rose in the quarter from a year earlier, income from its prime finance business was “significantly lower.” That reflected higher funding costs as well as lower client balances, which have recovered compared to their level in the fourth quarter.

Analysts had expected an 18% increase in fixed-income trading and a 2.6% decline in equities trading revenue, according to the average of eight estimates. Advisory revenue was down 24 percent.

The results suggest the bank has yet to fully win back the trust of clients, including hedge funds that reduced business in the final months of last year amid concern about the lender’s capital strength. Cryan has vowed to return to “controlled growth” after misconduct charges sapped years of earnings and forced the firm to tap investors for 8 billion euros ($8.7 billion) in fresh capital this month.

Deutsche Bank recovered about half the prime brokerage balances it lost in the fourth quarter, Chief Financial Officer Marcus Schenck, who was named co-head of the investment bank last month, said in an interview. Debt-trading revenue was hit by the bank’s 2015 decision to exit from securitized trading, he said. “We’re definitely not yet firing on all cylinders,” Schenck said in the interview with Bloomberg Television, adding it takes some time for prime brokerage balances to be rebuilt when clients return.

“We are rather disappointed,” Kian Abouhossein and Amit Ranjan, analysts at JPMorgan Chase & Co., wrote in a note. “This should normally be the best quarter in terms of revenue performance and market conditions were solid.”

“Some investors will be looking critically at the debt and equity trading numbers and asking whether this shows a loss in market share,” said Philipp Haessler, an analyst at Equinet Bank AG in Frankfurt who has a buy recommendation on the shares. “But there’s some positive news in there, too, if you look at the stable capital ratio, lower underlying costs and the inflows in the asset management business.”

Citi, which had the most critical read through of Deutsche Bank's results, said, Q1 earnings missed across all divisions except Postbank, and reiterated a sell rating on the stock. Citi also noted that statutory pretax missed estimates due to a 9% decline in revenue, while underlying pretax "also looks worse," while noting that capital guidance is "a concern."

Other details from the earnings report:

• GM revenues remained weak with FICC up 14% y/y, Equity down 7%, underperforming U.S. peers
• Corporate & Investment Bank pretax at EU489m is a 5% miss vs Citi est.
• Private, Wealth and Commercial Clients underlying pretax of EU93m
• Guidance for CET1 ratio to drop to ~13% by year end and for leverage ratio to remain stable at 4% is worse than Citi expected
• CET1 ratio is 14.1% pro-forma for rights issue, leverage ratio of 4% pro-forma is the binding constraint
• Even with AT1 issuance of EU2b and divestments, 2018 leverage ratio won’t be more than 4.3%, below the 4.5% target
• Global Markets pretax of EU490m missed Citi est. by 16%

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Finally, here is a summary of several sellside reactions to DB's disappointing earnings, courtesy of Bloomberg"

RBC CAPITAL (sector perform)

• Says 1Q showed no bounce back in revenue
• That’s disapppointing given better trading environment, fact that 1Q is seasonally the strongest quarter
• Revenue is key delta in meeting a cost of equity ROTE
• Global Markets revenue doesn’t compare well with peers
• Divisions were in line with RBC ests at adjusted pretax level with Global Markets 9% below consensus, CIB 7% above

JPMORGAN (neutral)

• 1Q results were disappointing because of revenue
• Disappointed that Deutsche is only making about 25% of JPM’s est for 2017 revenue in 1Q, would have hoped for 30%
• Revenue decline was only partly offset by CIB provisions write-backs
• Cost savings remain on track
• Global Markets revenue also missed, underperformed U.S. peers

BANKHAUS LAMPE (buy)

• 1Q results were in line
• While revenue of EU7.3b was 9% miss vs consensus, adj. revenue was flat at EU8b and a 1% beat
• Adj. costs of fell 5% to EU6.3b were in line with consensus
• Pretax EU878m is 7% miss amid revamp costs of EU179m
• Outlook is for regaining market share, CET1 to remain above 13%, litigation costs probably below 2016, LLPs below 2016

ODDO BHF (neutral) 

• Operating results are a bit below estimates, net revenue is in line
• Operating profit EU878m vs consensus EU938m, adj operating Profit is 21% miss
• Global Markets performance was weaker than U.S. peers’ with 1Q revenue of EU2.6b down 6.5%
• Fixed Income (sales & trading) revenue rose 12% vs U.S. peers up 24%
• Equity (sales & trading) revenue fell 7.5% vs U.S. peers gain of 1.2%
• Notes other trading income was strongly negative without much comment
• CIB revenue from ECM+DCM+M&A up 29% vs U.S. peers up 34%

CITI (sell) 

• Earnings missed across all divisions except Postbank
• Statutory pretax missed estimates due to an 8% decline in revenue, while underlying pretax "also looks worse"
• Capital guidance is "a concern"
• Guidance for CET1 ratio to drop to ~13% by year end and for leverage ratio to remain stable at 4% is worse than Citi expected
• CET1 ratio is 14.1% pro-forma for rights issue, leverage ratio of 4% pro-forma is the binding constraint
• Even with AT1 issuance of EU2b and divestments, 2018 leverage ratio won’t be more than 4.3%, below the 4.5% target
• Global Markets pretax of EU490m missed Citi est. by 16%; GM revenues remained weak with FICC up 14% y/y, Equity down 7%, underperforming U.S. peers
• Corporate & Investment Bank pretax at EU489m is a 5% miss vs Citi est.
• Private, Wealth and Commercial Clients underlying pretax of EU93m is significantly below Citi est. as revenue fell 5% y/y
• Sees risk of low, single-digit downgrades to EPS consensus

NATIXIS (reduce)

• Says while visibility on litigation has improved uncertainty remains
• Says market reaction should be "slightly positive" to this first quarterly earnings in some time without big litigation or revamp charges
• Says revenue miss driven by knock-on impact of narrowing of credit spreads
• 1Q net profit EU575m beat consensus EU531m on lower taxes
• Notes costs and loan loss provisions were lower
• Capital situation largely unchanged with CET1 ratio at 11.9% vs end 2016’s 11.8%; given capital increase pro-forma CET1 ratio is 14.1%
• Deutsche Bank remains "fairly cautious" on macro-economic outlook and negative impact of past disposals
• Deutsche Bank is more optimistic on regaining market share