Deutsche Bank Initiated at Outperform - Analyst Blog


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On Oct 7, 2013, we initiated our coverage on well-known foreign bank, Deutsche Bank AG ( DB ) at Outperform based on its superior position in the market aided by its positive approach to market conditions and cost-curtailment efforts. Moreover, a healthy capital position is indicative of the company's robust standing. However, the regulatory reforms and an unsettled global economy might act as deterrents for this Zacks Rank #1 (Strong Buy) stock.

Why Outperform?

Deutsche Bank's organic growth through its strong top line expansion, internal capital adequacy and prudent expense management prompted us to initiate with this stance.

Further, in its Strategy 2015+ announced in Sep 2012, Deutsche Bank declared a number of initiatives aimed at increasing its competitiveness. These initiatives included reductions in costs, duplication and complexity in the years ahead. The bank plans to spend approximately €4 billion over a three-year period starting 2012 with the goal of achieving full run-rate annual cost savings of €4.5 billion by 2015. We believe such achievements will aid bottom-line expansion.

Moreover, Deutsche Bank exhibited a strong capital position as of Jun 30, 2013. Core Tier 1 capital ratio came in at 13.3% at the quarter-end, up from 12.1% at the end of the prior quarter. Further, the bank's Basel 3 core Tier 1 ratio came in at 10.0%, higher than the company's estimate of 8.5%. Moreover, risk-weighted assets declined mainly due to successful execution of the risk reduction program in the NCOU and model roll outs.

Additionally, Deutsche Bank's internal capital adequacy ratio (CAR) was 170% as of Jun 30, 2013 compared with 158% as of Dec 31, 2012. A CAR of more than 100% signifies that the total capital supply is sufficient to cover the capital demand determined by the risk positions.

While progress was made on many issues during 2012, many of the underlying challenges still remain in 2013. Lingering issues related to the Eurozone sovereign debt situation and European banking system, tepid economic growth in the U.S. and the bleak outlook for growth in the global economy would continue to exert a strong influence on client confidence and, thus, Deutsche Bank's activity levels are expected to remain under pressure in the near term.

For Deutsche Bank, over the last 60 days, the Zacks Consensus Estimate for 2013 jumped 13% to $5.99 per share, while it moved north by 11.5% to $6.91 per share for 2014.

Other Stocks to Consider

Besides Deutsche Bank, other foreign stocks that are currently performing well include Sumitomo Mitsui Financial Group, Inc. ( SMFG ), Credit Suisse Group AG ( CS ) and Banco Bilbao Vizcaya Argentaria, S.A. ( BBVA ). All these 3 carry a Zacks Rank #1.

BANCO BILBAO VZ (BBVA): Free Stock Analysis Report

CREDIT SUISSE (CS): Free Stock Analysis Report

DEUTSCHE BK AG (DB): Free Stock Analysis Report

SUMITOMO-MITSUI (SMFG): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: BBVA , CAR , CS , DB , SMFG

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