Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Deutsche Bank Outlook No Worse After Election Upset

By Ken OdelugaStock MarketsSep 25, 2017 16:03
uk.investing.com/analysis/deutsche-bank-outlook-no-worse-after-election-upset-200197356
Deutsche Bank Outlook No Worse After Election Upset
By Ken Odeluga   |  Sep 25, 2017 16:03
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
DE40
-0.03%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DBKGn
+0.24%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CBKG
-1.52%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
RWEG
-0.20%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CRDI
+1.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Another day at the office

Monday was another day at the office for Germany’s underperforming large caps too, including Deutsche Bank (DE:DBKGn), after the conservatives won elections with the lowest vote since 1949. Deutsche bank was among the bottom three DAX stocks, in keeping with being Europe’s worst-performing large bank share this year. Deutsche and other vehicles of investor dissatisfaction, like utility RWE (LON:0HA0), which fell almost 5%, were always set to bear the brunt in the event of an election upset, even though Germany’s main stock index remained aloft. But everyone knows Deutsche’s problems go much deeper. Its shares have lingered near the all-time lows they hit last September and have now lost well over 10% since the group completed its €8bn capital hike in April.

Ex-distressed Deutsche

Other valuation measures show that progress is being made. Deutsche’s 50% discount to tangible book value at last check is better than its ‘distressed’ sub-30% early last year. Efforts by turnaround CEO John Cryan to cut the group’s cost base are going in the right direction...slowly. Costs fell 6% in the year to Q2—excluding restructuring expenses, legal charges and one offs. Deutsche’s capital has also improved. April’s cash call lifted the crucial core Tier 1 capital buffer to 14.1%, well away from 10.8% seen around a year ago. And the group also lived to tell the tale in January after settling a US Department of Justice case for ‘only’ half the $14bn prosecutors initially demanded.

Negative returns

But revenues still fell 10% in Q2, with the biggest hit in investment banking, from which Deutsche makes more than half its revenues. Investors have also punished the group for missing out on the fixed income, currencies and commodities (FICC) trading mini-boom in the second half of 2016. FICC has historically accounted for a third of Deutsche’s profits. All told, first-half return on tangible equity was a meagre 3.8%, and even that looks great compared to trailing ROE from Reuters data suggesting a negative return if Deutsche were to report this week. Investors have thereby recognised it will be a stretch to hit Cryan’s 10% ROE target for 2018.

Commerzbank (DE:CBKG) also straining

Deutsche is not alone in its problems, to be sure. Shares of arch rival, Commerzbank (LON:CZB), whose market value of €14bn is half that of the larger bank, also fell on Monday. Commerzbank is down 94% since end-June 2007 highs, slightly more than Deutsche. The spanner in the European integration works implied by Chancellor Angela Merkel’s weak win is a risk for all lenders. In the near term it could certainly cool tentative interest in Commerzbank from UniCredit (LON:0RLS), reported last week. Commerzbank bank is also barely through its own revamp plan, slated for completion in 2019.

Deutsche remains the most pivotal bank in Germany though, and the election result is certainly no help on its long journey back to health. But a more finicky political landscape can scarcely make the slog much worse.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Original post

Deutsche Bank Outlook No Worse After Election Upset
 

Related Articles

Deutsche Bank Outlook No Worse After Election Upset

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email