We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Revenue Growth Supports Deutsche Bank (DB), High Costs Ail
Read MoreHide Full Article
Deutsche Bank AG’s (DB - Free Report) strong balance sheet position and revenue growth will likely support its financials. Also, its strong liquidity profile aids sustainable capital distribution activities. However, a rise in expenses in the near term is expected to limit bottom-line growth.
Growth in net revenues has remained a key strength at Deutsche Bank. The metric increased over the years. DB is shifting its focus from investment banking to more stable businesses, like private bank, corporate bank and asset management unit. This is likely to aid revenues in the upcoming period. Management expects revenues to be €29 billion for 2023.
Deutsche Bank’s solid deposit balances support its financials. It benefits from a well-diversified deposit base across various client segments and regions. Also, its loan to deposit ratio as of Sep 30, 2023, was 79.3%, reflecting a strong and stable funding base. Notably, we believe that a stable deposit balance will strengthen its balance sheet.
DB remains focused on strengthening its capital position. As of Sep 30, 2023, Common Equity Tier 1 (CET 1) ratio improved to 13.9% from 13.8% in second-quarter 2023. The bank expects to maintain CET 1 ratio of approximately 13% by 2025.
Deutsche Bank’s liquidity position is robust. The company's €245 billion liquidity reserve was strong, with a liquidity coverage ratio of 132% in third-quarter 2023. Also, as of Sep 30, 2023, total debt (comprising long-term debt and other short-term borrowings) of €125.15 billion was lower than cash, central bank and interbank balances worth €175.88 billion.
This showcases that the bank has sufficient resources to fulfill its debt obligations. Given the strong liquidity position, its capital distribution activities seem sustainable, thereby stoking investors’ confidence in the stock.
However, higher expenses, mainly attributable to investments, restructuring and severance charges as well as higher litigation provisions, are near-term headwinds. Further, the cost base is likely to rise, given the investment in technology and inflationary pressures. This is likely to limit DB’s bottom-line growth in the upcoming period. Management projects non-interest expenses to be slightly higher in 2023.
Deutsche Bank has seen a deterioration in its credit quality. In 2022, it recorded provision for credit losses of €1.23 billion compared with €515 million in the prior year. Given the current uncertain macroeconomic backdrop, the company is likely to keep its provisions high in the near term.
Due to the nature of its business, Deutsche Bank is involved in litigation, arbitration and regulatory proceedings in Germany and a number of jurisdictions outside Germany. The bank shouldered significant legal settlement costs in the past, which adversely impacted its financials. Hence, any higher legal expenses are expected to affect its financials in the near term.
Shares of this Zacks Rank #3 (Hold) company have gained 6% on the NYSE over the past six months compared with the industry’s growth of 1.2%.
Image Source: Zacks Investment Research
Stocks to Consider
A couple of better-ranked stocks from the banking space are First Citizens BancShares, Inc. (FCNCA - Free Report) and Fifth Third Bancorp (FITB - Free Report) .
First Citizens BancShares currently carries a Zacks Rank #2 (Buy). Its earnings estimate for 2023 has been revised 3.7% upward over the past 30 days. In the past six months, FCNCA shares have improved 19.1%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimate for Fifth Third Bancorp has been revised 3.3% upward for 2023 over the past 30 days. Shares of FITB have rallied 5.2% in the past six months. FITB currently carries a Zacks Rank #2.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Revenue Growth Supports Deutsche Bank (DB), High Costs Ail
Deutsche Bank AG’s (DB - Free Report) strong balance sheet position and revenue growth will likely support its financials. Also, its strong liquidity profile aids sustainable capital distribution activities. However, a rise in expenses in the near term is expected to limit bottom-line growth.
Growth in net revenues has remained a key strength at Deutsche Bank. The metric increased over the years. DB is shifting its focus from investment banking to more stable businesses, like private bank, corporate bank and asset management unit. This is likely to aid revenues in the upcoming period. Management expects revenues to be €29 billion for 2023.
Deutsche Bank’s solid deposit balances support its financials. It benefits from a well-diversified deposit base across various client segments and regions. Also, its loan to deposit ratio as of Sep 30, 2023, was 79.3%, reflecting a strong and stable funding base. Notably, we believe that a stable deposit balance will strengthen its balance sheet.
DB remains focused on strengthening its capital position. As of Sep 30, 2023, Common Equity Tier 1 (CET 1) ratio improved to 13.9% from 13.8% in second-quarter 2023. The bank expects to maintain CET 1 ratio of approximately 13% by 2025.
Deutsche Bank’s liquidity position is robust. The company's €245 billion liquidity reserve was strong, with a liquidity coverage ratio of 132% in third-quarter 2023. Also, as of Sep 30, 2023, total debt (comprising long-term debt and other short-term borrowings) of €125.15 billion was lower than cash, central bank and interbank balances worth €175.88 billion.
This showcases that the bank has sufficient resources to fulfill its debt obligations. Given the strong liquidity position, its capital distribution activities seem sustainable, thereby stoking investors’ confidence in the stock.
However, higher expenses, mainly attributable to investments, restructuring and severance charges as well as higher litigation provisions, are near-term headwinds. Further, the cost base is likely to rise, given the investment in technology and inflationary pressures. This is likely to limit DB’s bottom-line growth in the upcoming period. Management projects non-interest expenses to be slightly higher in 2023.
Deutsche Bank has seen a deterioration in its credit quality. In 2022, it recorded provision for credit losses of €1.23 billion compared with €515 million in the prior year. Given the current uncertain macroeconomic backdrop, the company is likely to keep its provisions high in the near term.
Due to the nature of its business, Deutsche Bank is involved in litigation, arbitration and regulatory proceedings in Germany and a number of jurisdictions outside Germany. The bank shouldered significant legal settlement costs in the past, which adversely impacted its financials. Hence, any higher legal expenses are expected to affect its financials in the near term.
Shares of this Zacks Rank #3 (Hold) company have gained 6% on the NYSE over the past six months compared with the industry’s growth of 1.2%.
Image Source: Zacks Investment Research
Stocks to Consider
A couple of better-ranked stocks from the banking space are First Citizens BancShares, Inc. (FCNCA - Free Report) and Fifth Third Bancorp (FITB - Free Report) .
First Citizens BancShares currently carries a Zacks Rank #2 (Buy). Its earnings estimate for 2023 has been revised 3.7% upward over the past 30 days. In the past six months, FCNCA shares have improved 19.1%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimate for Fifth Third Bancorp has been revised 3.3% upward for 2023 over the past 30 days. Shares of FITB have rallied 5.2% in the past six months. FITB currently carries a Zacks Rank #2.