European Banking Notes: Deutsche Bank, Credit Suisse and RBS

September 21st, 2015 · by Trefis Team
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European bank stocks had a poor showing last week, with gains seen over the first four days being wiped out by a sharp sell-off on Friday, September 18. Investors around the world were upbeat at the beginning of the week as they expected the Federal Reserve to announce its first interest rate hike since 2008, but the optimism melted away when the Fed stuck to the current record low rates citing a weak global economy. The profit-starved banking sector was hit hard by the ensuing sell-off, which saw share prices fall across sectors.

The banking sector-specific STOXX Europe 600 Banks index lost 1.5% over the week – underperforming its multi-industry equivalent, the STOXX Europe 600 index, which gained a little more than 0.5% over the same period.

Deutsche Bank

Deutsche Bank (NYSE:DB) is discontinuing a bulk of its operations in Russia, with the German banking giant announcing plans to shutter its investment banking as well as custody banking operations in the country.  [1] The move is a part of the broader organization-wide reorganization plan, Strategy 2020, announced by the bank in April. Deutsche Bank will retain its transaction services business in Russia, and will provide international clients access to Russian securities through third-party vendors.

You can read more about the move and its impact on Deutsche Bank’s share value in our article Deutsche Bank’s Decision To Exit Russia The First Of Many Moves To Boost Profitability.

  • Trefis has a $38 price estimate for Deutsche Bank’s shares, translating into a $52 billion market cap. This is about 30% ahead of the market price between $28-30 seen over the week.
  • We estimate the company’s FY 2015 revenues to be $42 billion for earnings per share of $3.26, compared to a consensus of $3.31 according to Reuters

See our full analysis for Deutsche Bank

[trefis_slideshow ticker=”DB” rhs=”3″]

Credit Suisse

Credit Suisse (NYSE:CS) is reportedly close to a deal with regulators over the alleged securities violations committed by its “dark pool” trading operations. [2] The Swiss bank could pay as much as $85 million to settle investigations into these operations by the New York Attorney General and the Securities and Exchange Commission (SEC). Rival UBS settled a similar issue with the SEC earlier this year, while Barclays is also involved in settlement talks with regulators over this matter.

  • Trefis has a $27 price estimate for Credit Suisse’s shares, translating into a $44 billion market cap. This is around the market price seen over the week.
  • We estimate the company’s FY 2015 revenues to be $28 billion for earnings per share of $2.97, compared to a consensus of $2.35 according to Reuters

See our full analysis for Credit Suisse

[trefis_slideshow ticker=”CS” rhs=”3″]

RBS

The Royal Bank of Scotland (NYSE:RBS) has hired Bank of America-Merrill Lynch to oversee the spin-off of Williams and Glyn. [3] The spin-off was one of several conditions to which RBS had to agree as a part of its bailout by the European Commission in 2008, but the bank faced several difficulties in actually separating the Williams and Glyn business. A previous deadline of 2013-end for the spin-off was extended to the end of 2017. An IPO is now expected in early 2016, and could raise as much as £1.5 billion in cash for RBS.

  • Trefis has a $11.50 price estimate for RBS’s shares, translating into a $37 billion market cap. This is about 15% above the market price of around $10 seen over the week
  • We estimate the company’s FY 2015 revenues to be around $23 billion for an earnings per share of $0.37, compared to a consensus of $0.46 according to Reuters

See our full analysis for RBS

[trefis_slideshow ticker=”RBS” rhs=”3″]

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Notes:
  1. Deutsche Bank to streamline operations in Russia, Deutsche Bank Press Releases, Sep 18 2015 [↩]
  2. Credit Suisse Reaches Tentative $85 Million Settlement on ‘Dark Pool’ Probe, The Wall Street Journal, Sep 15 2015 [↩]
  3. RBS hires Bank of America for Williams and Glyn float, The Telegraph, Sep 12 2015 [↩]
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