Deutsche Bank (DBK.DE) CEO Christian Sewing said the bank has “laid a solid foundation for the next phase,” as it delivered weaker than forecast results.

Sewing also batted away questions about a potential merger with fellow German lender Commerzbank (CBK.DE). Rumours of a potential combination have repeatedly dogged Deutsche Bank and Bloomberg reported on Thursday that a deal may come as soon as this summer.

“We never comment on any merger rumours … but rest assured that our business will not suffer from those kinds of things,” Sewing said.

Answering another question on the merger chatter, Sewing said he and the management team were focused on their core plan.

“Last year I said we’ve got to do our homework — well, we’re working on it,” he told reporters. “We’ve got some more homework coming up in 2019 and we’re working on that.”

‘Weaker than anticipated’

Deutsche Bank on Friday reported a net profit of €341m for 2018, its first net profit since 2014. However, revenues fell by 4% to €25.3bn.

Return on tangible equity was 0.5% but the bank reiterated its target of 4% for 2019.

Revenues and profits in the fourth quarter were also “weaker than anticipated,” according to Barclays analysts, “especially in fixed income and currencies.”

“The miss is driven by weaker underlying revenues (€5.35bn versus our estimate of €5.49bn and consensus €5.67bn [in the fourth quarter]) partly offset by lower costs,” Barclays’ analysts Amit Goel, Jun Yang, and Krishnendra Dubey said in a note on the numbers. “Provisions [were] also higher than anticipated.”

Deutsche Bank said in the statement that the fourth quarter of 2018 was “challenging” and the bank was also hit by “negative Deutsche Bank-specific news including the raid by state prosecutors on the bank’s premises in late November.”

‘A new cost discipline’

“For 2018, it’s absolutely fair to say that we delivered on our promises. After making a loss of over €6bn in 2015, we have steadily improved our earnings,” Sewing said Friday at a media conference in Germany.

He said that Deutsche Bank beat its cost cutting targets, with costs of €22.8bn for the year against a target of €23bn.

“We have established a new kind of cost discipline, a type of discipline that did not exist in this bank,” Sewing said.

After cutting 6,000 jobs and stripping cost out of the business in 2018, Sewing said he was “convinced that we have laid a solid foundation for the next phase,” where the “primary focus is on controlled growth.”

“The range of possible outcomes is wide,” UBS analysts Daniele Brupbacher and Mate Nemes said in a note. “In our view, DB’s key problem is that profitability is low, ie. the P&L cannot absorb adverse trends or even shocks well.”

Legal issues ‘smaller than they seem’

The German lender was dogged by legal and regulatory issues in 2018. In November, Deutsche Bank’s Frankfurt officers were raided by prosecutors investigating the Panama Papers. The bank has also been linked to Danske Bank’s recent money laundering scandal and the cum/ex tax avoidance scheme.

Deutsche Bank’s president and chief administrative officer Carl von Rohr said these issues were “much smaller than they might seem.”

“From what we know today, none of these matters bares the financial risks of the other issues” that the bank has dealt with in the past, he said. He added that the bank hasn’t set up any provisions or conditional liabilities in connection to these matters.

Deutsche Bank shares were down as much as 3% on Friday morning.