Deutsche Bank’s stock (NYSE: DB) has lost 27% YTD, as compared to the 10% decline in the S&P500 over the same period. Further, it is currently trading at $9 per share, which is 30% below its fair value of $13 – Trefis’ estimate for Deutsche Bank’s valuation. The bank outperformed the consensus estimates in the recently released second-quarter results. Its net revenues increased 6% y-o-y to $7.1 billion, mainly driven by growth in the corporate bank and investment bank divisions. The growth in the corporate bank segment was driven by an increase in interest rates and fee income. Similarly, the investment bank benefited from higher FICC (fixed income, currency & commodity) trading and advisory revenues, partially offset by a drop in underwriting business. Overall, the adjusted net income improved 34% y-o-y to $1.11 billion in the quarter. It was partly due to growth in the top-line and partly due to lower non-interest expenses as a % of revenues. (Note – Deutsche Bank originally reports in € (Euros), the same has been converted to USD for ease of comparison)
The bank’s top-line increased 10% y-o-y to $30.1 billion in 2021, primarily driven by a 28% rise in advisory & underwriting revenues, a 26% growth in asset management, and a 5% increase in the private & commercial bank divisions. Further, the adjusted net income improved from $167 million to $2.4 billion, mainly due to a favorable decrease in provisions for credit losses.
Although the net revenues for the first half of 2022 increased 4% y-o-y to €13.98 billion, it translated into a 6% y-o-y decrease to $15.3 billion due to foreign exchange movements. That said, the adjusted net income grew 19% y-o-y to $2.3 billion due to a drop in noninterest expenses as a % of revenues. We estimate Deutsche Bank’s revenues to remain around $27.4 billion in FY2022. Additionally, DB’s adjusted net income margin is likely to remain around the same level as the previous year, leading to an adjusted net income of $2.2 billion and an annual EPS of $1.04. This coupled with a P/E multiple of just below 13x will lead to the valuation of $13.
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