Deutsche Bank (
) is a leading global investment bank headquartered in Frankfurt,
Germany. The bank offers financial products and services for a
variety of global clients including corporations, governments,
financial institutions. It competes with other global investment
banks like Credit Suisse (
), UBS (
), JP Morgan (
), Morgan Stanley (
) and Goldman Sachs (GS).
Our price estimate for Deutsche Bank's stock stands at
, around 10% below the current market price, with the sales &
trading division constituting around 24% of this value. Sales &
trading includes trading of bonds, currencies & commodities as
well as equities. Through its equity trading operations, Deutsche
Bank generates revenue from both making markets for clients as well
as from placing proprietary bets.
Deutsche Bank's Trading Assets for Equities
Trading assets for equities is highly dependent on the
performance of the financial services sector, and capital markets
in particular. Since this asset base is marked-to-market, it
is subject to sharp fluctuations.
The value of Deutsche Bank's trading assets for equities
declined from around $280 billion in 2006 to around $130 billion in
2009, largely due to declining liquidity and trading volumes during
the economic downturn. As the economic environment improves, we
expect this to increase at an annual growth rate of around 7.5%,
reaching around $230 billion by the end of our forecast period.
Though 2010 was volatile, many experts believe that 2011 will be
a good year for the stocks, with corporate profits being driven by
rising consumer confidence and low interest rates. In a survey by
Barron's, 10 leading strategists and investment managers indicated
roughly 10% improvement in the S&P 500 this year (with
estimates ranging from 7% to 17% improvement).
An AAII Investor Sentiment Survey also indicates that retail
investors are becoming more bullish in 2011, after being a bit
cautious in 2010.
Further, analysts at Deutsche Bank expect stock ETFs to perform
better than fixed income and commodities ETFs, stating that global
stock ETF inflows could reach a record $200 billion in 2011, with
worldwide ETF assets growing by around 30% to $1.33 trillion.
We expect these factors to help increase volumes as well as
returns across equities markets, which can provide an upside to our
forecast for Deutsche Bank. To highlight the firm's sensitivity to
this metric, we estimate that, should its trading assets for
equities increases at an annual growth rate of 13% (vs. our 7.5%
base estimate) and reach $350 billion by the end of our forecast
period, it would imply 4% upside to our
price estimate for Deutsche Bank.
See our full analysis for Deutsche Bank