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DB has reported very sound Q1 results in all divisions, thereby fully justifying management’s strategy of balance sheet reduction and costs restructuring., The announcement in itself would have served as a catalyst for the shares as estimates will have to be pushed up by some 5-6% for 2013-2014. At the same time, management satisfactorily raised €2.8bn of capital this morning, wiping out a 30% discount through a 9% dilution. PLUS rating reiterated with conviction.
DB’s Q4 results have come out well below expectations, but for good reasons and with little real impact on shareholders. In spite of a €2.2bn net loss, management has proposed an unchanged dividend (€0.75) and the group’s solvency has improved substantially. Although the restructuring programme has forced management to recognise some write-downs in 2012, it will have a positive impact in the future. PLUS rating confirmed; re-rating expected in the near future.
DB’s Q3 results have come in better than expected, which bodes well for its accumulation of capital. While the group’s solvency has improved, it is not particularly a star pupil in this area. That said, its progress is encouraging and the share price still reflects a highly dilutive equity issue, which will not necessarily materialise. PLUS rating reiterated.
Q2 results proved distinctly weaker than expected but not catastrophically so. However, they are low enough to force the management to react immediately and present the outlines of a strategic review. This has come rather late (change of management) but does seem to offer coherent solutions to the group’s main problems. PLUS rating confirmed in the meantime because the valuation takes on board a big capital increase.
DB has published lower than expected Q1 operating profit of €1.9bn (vs. €2.4bn), hit by non-recurring items. However, the group’s underlying performance is better than expected overall. Solvency - the group’s main weakness - continues to improve, warding off the spectre of a dilutive rights issue. However, the group’s very low valuation of 0.54x 2012e book value appears to already reflect this prospect as being very likely. PLUS rating reiterated.
Deutsche Bank remains in essence a major investment bank, even after the integration of Deutsche Postbank. However, this acquisition strengthens links with its robust domestic economy and de-risks the group’s general profile. In terms of solvency, despite the capital increase (to finance the acquisition of DPB) in 2010, the group’s solvency ratios are rather low compared to its direct competitors. But the group can count upon the fact that assets which require a heavy capital commitment are reaching maturity and also on the sale of non-strategic business activities. The fact that the bank is based in Germany is an advantage for its funding.
Q4 results posted by DB are disappointing. The bank published a pre-tax loss of €351 million against a profit forecast of €985 million expected by the market. The environment took its toll on its investment banking businesses and the group was confronted with a large series of extraordinary charges. On the other hand, news on the sensitive subject of solvency is very reassuring and will safeguard DB against the need to increase its capital; the market currently values DB at 0.55x its book value. PLUS code confirmed.
DB was affected by the crisis in Q3 because market activities are predominant in its business model. The equity derivatives trading proved particularly penalising during the quarter and one-off items totalling €329 million undermined the quarterly figures. However, we were reassured by the group’s low residual exposure to sovereign debt and the resilience of its German commercial banking activities. The share price discount assumes a disproportionately bleak scenario.
Deutsche Bank remains in essence a major investment bank even after the integration of Deutsche Postbank, but this acquisition strengthens the links with its robust domestic economy and de-risks the group’s general profile. The share has suffered from being the only big bank in euroland available for short selling, but this is only temporary. PLUS code confirmed.
The investment bank's results were below expectations in Q2, but for the rest, DB was rather impressive. The group has generated 150bp of capital since the beginning of the year, whereas the market feared a large capital increase. The strategy of diversification in the commercial bank in Germany is also bearing fruit with a constant increase in income from more resilient activities — hence the maintenance of the objectives. The discount of 26% on the basis of the 2012e results is excessive. PLUS reiterated.
Deutsche Bank started 2011 well thanks to its investment bank which is once again in great shape, but also to the unexpected support of its business by the retail bank in Germany. The integration of the Deutsche Postbank, which the management only expected to break even this year, produced €221m of profits in the first quarter. The €2.1bn of net earnings for the first quarter contributed significantly to the increase in the shareholders’ equity. The share’s discount is not justified. PLUS code confirmed.
Deutsche Bank remains essentially a major investment bank even after the integration of Deutsche Postbank, but this acquisition strengthens the links with its robust domestic economy. The year began with market share gains in investment banking and expenditure which was finally acknowledged in 2010. Only its solvency, which is almost on the borderline, explains the discount of this share against its competitors. PLUS code confirmed.
Deutsche Bank closed 2010 with a strong Q4 in investment banking, despite the traditional seasonal low. The company has reported better performance than its competitors who have announced their results so far, especially on equities’ trading where the 34% sequential progression of revenues is remarkable. The transfer of costs amounting to €750 million from 2011 to Q4 2010 makes the attainment of a €10 billion pre-tax profit more feasible. Especially as 2011 is already off to a good start.
Following disappointing performance by Swiss investment banks, DB reassured the market with good quality, higher-than-expected results. The group has reiterated its 2011 pre-tax profit target of €10 billion, this time giving it credibility by breaking it down. Moreover, the group has demonstrated that it has sufficient capital — something not taken for granted by many investors from English-speaking countries. The stock is trading at an unjustified 25% discount to the sector ahead of any raising of estimates. We reiterate our PLUS rating.
The Deutsche Bank share came under pressure in recent weeks because of: 1) doubts about the activity of the investment banking arm which has now been included in the valuations, 2) fears over the bank’s solvency which are overdone and 3) lastly, the recent capital increase. Although this increase has a diluting effect it has mitigated market observers’ two first reservations about this share without, however, eliminating the discount against its peers.
Following stratospheric Q1 performance on the investment banking side, DB fell back to earth in Q2 and landed among its competitors. The €1.2 billion net profit is in line with the optimistic expectations which emerged in the previous quarter. However, the sequential decline of BFI activities is paving the way for the expected recovery in Q3 of all the transactions which remained in the pipeline during the recent bear markets. The 35% discount on the share price is highly exaggerated, even if the shareholders’ equity would benefit from organic strengthening.
Q1 got off to a strong start at Deutsche Bank, with a net result 40% above expectations. We were expecting an investment bank in robust health and that has indeed proved to be the case. This excellent performance is welcome because it makes the ambitious target of a €10 billion pre-tax profit by 2011 credible. With the cash acquisition of Sal. Oppenheim (although it could have exchanged shares), the management has also shown that it is comfortable with the present shareholders’ equity level.
We are introducing Deutsche Bank with a PLUS code. This is one of the few investment banks to have emerged strengthened from the crisis without resorting to public aid. It is therefore ideally positioned to benefit from the recent rebound of activity in this area. In parallel, even though the regulatory risk still hovers over the investment banking industry, this has been more than fully discounted in the share price which is trading at a 25-30% discount to its peer group.
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