Deutsche Bank’s stock (NYSE: DB) has lost 15% YTD, as compared to the 16% decline in the S&P500 over the same period. Further, it is currently trading at $11 per share, which is 16% below its fair value of $13 – Trefis’ estimate for Deutsche Bank’s valuation. The bank surpassed the consensus estimates in the recently released third quarter, with net revenues increasing 15% y-o-y to €6.92 billion. However, it translated into $6.97 billion – down 2% y-o-y, due to the negative impact of foreign exchange movements (Note – Deutsche Bank originally reports in € (Euros), the same has been converted to USD for ease of comparison). The investment bank division reported a drop of 9% y-o-y in dollar terms due to a significant decrease in investment banking income, partially offsetting the growth in sales & trading business. Further, the private bank and asset management segments also suffered in the quarter. On the flip side, corporate bank revenues increased by 7%, primarily driven by the corporate treasury services unit. Overall, the bank’s adjusted net income (GAAP) increased from $361 million to $1.22 billion, mainly due to lower noninterest expenses as a % of revenues.
The bank’s top line grew 7% y-o-y to €6.92 billion in the first nine months of 2022. However, this translated into a drop of 5% to $22.3 billion due to negative FX movement. The net interest income improved over the period due to loan growth and interest rate hikes. Further, the sales & trading business saw positive growth due to market volatility.
Moving forward, we estimate the Deutsche Bank’s revenues to remain around $27.5 billion in FY2022. Additionally, DB’s adjusted net income margin is likely to increase from around 8% to 11% in the year. It will likely result in a GAAP EPS of $1.43, which coupled with a P/E multiple of just below 9x will lead to a valuation of $13.
|S&P 500 Return||4%||-16%||80%|
|Trefis Multi-Strategy Portfolio||4%||-19%||221%|
 Month-to-date and year-to-date as of 11/25/2022
 Cumulative total returns since the end of 2016