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Balanced View on Deutsche Bank - Analyst Blog

On May 21, 2014, we issued an updated research report on Deutsche Bank AG ( DB ). The company recently reported dismal first-quarter 2014 results. With continuing uncertainty around emerging markets, the company recorded a deteriorating top line. Yet, prudent expense management led to a fall in expenses.

Deutsche Bank posted net income of €1.1 billion ($1.5 billion) in the first quarter of 2014, down from €1.7 billion ($2.2 million) in the prior-year quarter. Furthermore, the bank reported net revenue of €8.4 billion ($11.5 billion) in the reported quarter, down 11% year over year.

Though organic growth remained a key strength at Deutsche Bank, as reflected by its revenue growth story in the past with a CAGR of 19.9% over the five years (2008-2012), revenues dropped 5% in 2013, primarily due to a downturn in corporate banking and securities business. Further, revenues were down 10% year over year in first-quarter 2014. Continuation of such a trend will become a hindrance for bottom-line growth.

However, despite recording a CAGR of 11.3% over the 5 years (2008-2012), non-interest expenses declined 11% in 2013 and 2% in first-quarter 2014, reflecting the company's successful expense reduction initiatives. Deutsche Bank contemplates making investments of approximately €4 billion and undertaking other measures to help achieve full run-rate annual cost savings of €4.5 billion by 2015.

Amid the worldwide economic volatility, the company is focused on building its capital level. Strategy 2015+ efforts are encouraging and we expect such efforts to help improve its operating efficiency.

Following first-quarter 2014 results, the Zacks Consensus Estimate decreased 4.8% to $5.33 for 2014, over the last 30 days, while the Zacks Consensus Estimate declined 8% to $6.87 for 2015. Hence, Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell).

Key Picks from the Sector

Some better ranked foreign stocks worth considering include Banco Bradesco S.A. ( BBD ) with a Zacks Rank #1 (Strong Buy), while ICICI Bank Ltd. ( IBN ) and Lloyds Banking Group plc ( LYG ) carry a Zacks Rank #2 (Buy).

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BANCO BRADESCO (BBD): Free Stock Analysis Report

DEUTSCHE BK AG (DB): Free Stock Analysis Report

ICICI BANK LTD (IBN): Free Stock Analysis Report

LLOYDS BANK GRP (LYG): Free Stock Analysis Report

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


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

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