European Banking Notes: Deutsche Bank, HSBC and Credit Suisse

April 14th, 2015 by Trefis Team
+18.57%
Upside
40.52
Market
48.04
Trefis
HSBC: HSBC logo
HSBC
HSBC

Last week was a lukewarm period for European banks, as the gains seen by the larger market from growing optimism about the European Central Bank’s (ECB) stimulus measures had a limited impact on the banking sector. Concerns about Greece’s ability to pay its debt installment and a notable appreciation in the value of the U.S. dollar played a role in holding back bank shares for the period. While Deutsche Bank (NYSE:DB) shares lost 1.5% over the week, shares of the British banks Barclays (NYSE:BCS) and RBS (NYSE:RBS) were also in the red. Swiss banks UBS (NYSE:UBS) and Credit Suisse (NYSE:CS) saw no sizable movement in share price.

As a whole, European banks lost some share value over the week as the banking sector-specific STOXX Europe 600 Banks index fell 0.6% – underperforming its multi-industry equivalent, the STOXX Europe 600 index, which gained 1.3%. Notably, the STOXX Europe 600 reached an all-time high at the end of the week.Credit Suisse

Credit Suisse (NYSE:CS) was rumored to be in talks to acquire its Swiss rival Julius Baer early last week. [1] Investors reacted positively to the news of a potential merger between the second and third largest Swiss wealth managers, as it would mean unlocking significant value in terms of cost synergies. Credit Suisse would also benefit in particular from Julius Baer’s strong asset base in the U.S. The rumors were quashed over the weekend when Julius Baer CEO Boris Collardi denied any such talks between the companies. [2]

  • Trefis has a $27 price estimate for Credit Suisse’s shares, translating into a $43 billion market cap. This is slightly below the market price of $28 seen over the week.
  • We estimate the company’s FY 2015 revenues to be $29 billion for an earnings per share of $2.99, compared to a consensus of $2.55 according to Reuters
Relevant Articles
  1. Up 24% Since The Beginning Of 2023, What Should You Expect From HSBC Stock?
  2. Where Is HSBC Stock Headed?
  3. What To Expect From HSBC Stock?
  4. Is HSBC Stock Undervalued?
  5. What To Expect From HSBC Stock?
  6. Is HSBC Stock Still Attractive?

See our full analysis for Credit Suisse

Deutsche Bank

One of the last remaining global banking giants yet to settle investigations into its role in manipulating the benchmark LIBOR rate, Deutsche Bank (NYSE:DB) is finally close to a deal with regulators. [3] The largest German bank is likely to cough up $1.5 billion to put this issue behind it, and may also agree to a guilty plea from one of its smaller subsidiaries. The bank has been under investigation since late 2012 for colluding with other banks over fixing the LIBOR rate. Notably, the reported settlement fee will be the largest penalty for any bank involved in the scandal.

  • Trefis has a $37 price estimate for Deutsche Bank’s shares, translating into a $51 billion market cap. This is slightly ahead of the market price between $35-36 seen over the week.
  • We estimate the company’s FY 2015 revenues to be $44.5 billion for an earnings per share of $3.79, compared to a consensus of $3.15 according to Reuters

See our full analysis for Deutsche Bank

HSBC

French prosecutors stepped up their action against HSBC (NYSE:HSBC) in their ongoing tax evasion investigation, as they expanded the scope of their investigation from the banking giant’s Swiss subsidiary to the parent group holding company. [4] HSBC’s Swiss banking unit is being investigated by France since late last year, with the unit posting €50 million ($55 million) as bail. The increased scope of the investigation comes with a demand from French prosecutors for HSBC to post a significantly higher bail amount of €1 billion ($1.1 billion). We don’t expect HSBC’s decision to challenge the bail amount in French courts to bring much relief, given that UBS (NYSE:UBS) was forced to post a similar bail amount in a tax evasion investigation last year. [5]

  • Trefis has a $54 price estimate for HSBC’s shares, translating into a $208 billion market cap. This is roughly 20% ahead of the market price of around $45 seen over the week
  • We estimate the company’s FY 2015 revenues to be around $65 billion for an earnings per share of $0.94, compared to a consensus of $0.89 according to Reuters

See our full analysis for HSBC

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

Notes:
  1. Julius Baer Jumps on Credit Suisse Takeover Speculation, Bloomberg, Apr 8 2015 [↩]
  2. Julius Baer CEO says has not held deal talks with Credit Suisse, Reuters, Apr 12 2015 [↩]
  3. Deutsche Bank Said Near $1.5 Billion Settlement on Libor, Bloomberg, Apr 9 2015 [↩]
  4. France widens HSBC Swiss bank inquiry to global holding company, The Guardian, Apr 9 2015 [↩]
  5. HSBC Ordered to Pay $1.1 Billion in Bail in French Tax Probe, Bloomberg, Apr 9 2015 [↩]