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Deutsche (DB) Sees Higher IB Revenues, Further Cost Decline by '22
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At its Investor Day held on Wednesday, Deutsche Bank AG’s (DB - Free Report) CEO Christian Sewing informed that the bank is well on track to achieve sustainable profitability, which includes bolstering performance while maintaining decent cost and capital levels.
Executives of Deutsche Bank updated investors with new targets that the lender seeks to deliver based on current scenario. Also, it revealed plans to invest in technology.
Let’s take a look at the key metrics for which the bank has provided updated outlook.
Adjusted Costs to Fall Further
Sewing disclosed that the bank is expected to report adjusted costs of €16.7 billion by 2022, down from the previous target of €17 billion. Apart from the 18,000-job cut drive that Deutsche Bank had announced earlier, it seeks to reduce costs even further by handling the stranded costs in its Capital Release Unit. Also, it sees room for cost savings from central and divisional measures, which it has planned for.
Improved Investment Bank (IB) Revenues
Mark Fedorcik, head of IB, expects the segment to generate €8.5 billion in 2022, up €600 million from the prior expectations. To achieve the target, Deutsche Bank will expand further into sectors such as healthcare, industrials, consumer and technology media and telecom, where it sees opportunities for advisory business and cross border activity.
IBs have largely benefited in 2020 so far from the high market volatility and prompt government stimulus. Deutsche Bank expects to report €9.1 billion in revenues from IB for 2020.
A couple of major U.S. banks such as, JP Morgan (JPM - Free Report) and Bank of America (BAC - Free Report) are also optimistic regarding the performance of their IB units.
Lower Revenues in Corporate Bank
Marred by the impact of lower interest rates in the domestic economy, revenues at the Corporate Bank are expected to fall in 2022. Persistently low rates have also forced Sewing to change his restructuring course by being less focused on corporate bank and relying slightly more on trading.
Credit Quality
Deutsche Bank expects credit loss provisions to decline in 2021, as major part of the pandemic is almost behind us. Further, in 2020, provisions are expected to normalize to a range of 25-30 basis points of loans. Also, it seeks to continue benefiting from limited exposure to sectors most affected by the pandemic.
The stock has gained 24.8% on the NYSE in the past six months compared with the industry’s growth of 29.3%.
A better-ranked stock in the same space is UBS Group AG (UBS - Free Report) . The company has witnessed 19.7% upward earnings estimate revision for the current year in the past 60 days. This Zacks Rank #2 (Buy) stock has gained 35% over the past six months.
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Deutsche (DB) Sees Higher IB Revenues, Further Cost Decline by '22
At its Investor Day held on Wednesday, Deutsche Bank AG’s (DB - Free Report) CEO Christian Sewing informed that the bank is well on track to achieve sustainable profitability, which includes bolstering performance while maintaining decent cost and capital levels.
Executives of Deutsche Bank updated investors with new targets that the lender seeks to deliver based on current scenario. Also, it revealed plans to invest in technology.
Let’s take a look at the key metrics for which the bank has provided updated outlook.
Adjusted Costs to Fall Further
Sewing disclosed that the bank is expected to report adjusted costs of €16.7 billion by 2022, down from the previous target of €17 billion. Apart from the 18,000-job cut drive that Deutsche Bank had announced earlier, it seeks to reduce costs even further by handling the stranded costs in its Capital Release Unit. Also, it sees room for cost savings from central and divisional measures, which it has planned for.
Improved Investment Bank (IB) Revenues
Mark Fedorcik, head of IB, expects the segment to generate €8.5 billion in 2022, up €600 million from the prior expectations. To achieve the target, Deutsche Bank will expand further into sectors such as healthcare, industrials, consumer and technology media and telecom, where it sees opportunities for advisory business and cross border activity.
IBs have largely benefited in 2020 so far from the high market volatility and prompt government stimulus. Deutsche Bank expects to report €9.1 billion in revenues from IB for 2020.
A couple of major U.S. banks such as, JP Morgan (JPM - Free Report) and Bank of America (BAC - Free Report) are also optimistic regarding the performance of their IB units.
Lower Revenues in Corporate Bank
Marred by the impact of lower interest rates in the domestic economy, revenues at the Corporate Bank are expected to fall in 2022. Persistently low rates have also forced Sewing to change his restructuring course by being less focused on corporate bank and relying slightly more on trading.
Credit Quality
Deutsche Bank expects credit loss provisions to decline in 2021, as major part of the pandemic is almost behind us. Further, in 2020, provisions are expected to normalize to a range of 25-30 basis points of loans. Also, it seeks to continue benefiting from limited exposure to sectors most affected by the pandemic.
The stock has gained 24.8% on the NYSE in the past six months compared with the industry’s growth of 29.3%.
Deutsche Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock in the same space is UBS Group AG (UBS - Free Report) . The company has witnessed 19.7% upward earnings estimate revision for the current year in the past 60 days. This Zacks Rank #2 (Buy) stock has gained 35% over the past six months.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>