Deutsche Bank’s stock (NYSE: DB) has lost 8% YTD, as compared to the 12% rise in the S&P500 over the same period. Further, it is currently trading at $11 per share, which is 26% below its fair value of $14 – Trefis’ estimate for Deutsche Bank’s valuation. The bank outperformed the consensus estimates in the first quarter of 2023. It reported a net €7.68 billion – up 5% y-o-y. However, it translated into $8.24 billion – at the same level as the year-ago period, 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). In Euro terms, the revenue growth was driven by a 35% rise in the corporate bank and a 10% growth in the private bank segments, mainly driven by higher net interest income. However, the 19% drop in the investment bank and a 14% decline in the asset management unit negatively impacted the growth figure. On the cost front, the non-interest expense as a % of revenues decreased in the quarter, leading to a 9% improvement in the net income to €7.68 billion, translating into $1.39 billion (up 4%) in dollar terms.
The bank’s top line improved 7% y-o-y to €27.2 billion in FY 2022. It was due to growth in the net interest income, thanks to interest rate hikes and loan growth. However, lower revenues in investment banking and asset management divisions eroded some of the positive impacts of revenue growth. That said, the net revenues were reduced by 5% to $28.7 billion in dollar terms due to the negative impact of the FX movement.
Moving forward, we estimate the Deutsche Bank’s revenues to remain around $30.55 billion in FY2023. Additionally, DB’s adjusted net income is likely to be around 15%, resulting in a net income of $4.50 billion. This coupled with a GAAP EPS of $2.21 and a P/E multiple of just below 7x will lead to a valuation of $14.
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|S&P 500 Return||3%||12%||92%|
|Trefis Multi-Strategy Portfolio||4%||14%||259%|
 Month-to-date and year-to-date as of 6/12/2023
 Cumulative total returns since the end of 2016