After a series of bank failures and bailouts worldwide, investors were anxious on Friday, as Deutsche Bank AG's DB shares fell by as much as 14%.
Deutsche Bank's shares fell 11.6% in Frankfurt trading, while its U.S. listed shares fell 6%. The price of the lender's credit default swaps that had reached a four-year high on Thursday was affected by the drops.
According to the German Chancellor Olaf Scholz, Deutsche Bank has reorganized and modernized its business model, and is very profitable, according to a new conference in Brussels on Friday. In recent years, the bank has undergone a multibillion-euro restructure and improved its profitability. According to a report by CNBC, the bank had an annual net income of $5.4 billion in 2022, up 159% from the previous year.
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Research firm Autonomous, a subsidiary of AllianceBernstein, dismissed the concerns, pointing out the bank's robust capital and liquidity positions, despite the fact that investors remain worried about the bank's U.S. commercial real estate exposures and substantial derivatives book. Our Underperform' rating on the stock is due to our view that there are more attractive equity stories elsewhere in the sector i.e. CNBC quoted the autonomous strategists Stuart Graham and Leona Li as saying.
We have no concerns about Deutsche's viability or asset marks. Deutsche is not the next Credit Suisse, according to the analysts.
Graham and Li stated that Deutsche Bank is solidly profitable and that they forecast a return on the tangible book value of 7.1% for 2023 and 8.5% by 2025.
The German bank has had its share of headline pressure and governance fumbles, according to a note on Friday by JPMorgan strategists. The bank had a far lower quality franchise to begin with, which is significantly less levered today, but it still commands a relatively elevated cost base and has relied on its FICC fixed income, currencies and commodities trading franchise for organic capital generation and credit re-rating, according to the strategists.
Whereas Deutsche's governance fumbles could not cost' the bank anything in franchise loss, Credit Suisse was immediately punished with investor outflows in the Wealth Management division, which should have been seen as the bank's 'crown jewel' to deepen the bank's P&L losses, they added.
Credit Suisse Group AG CS, caught in the panic that followed Silicon Valley Bank's demise, was taken over by UBS Group AG UBS in a hurriedly arranged deal earlier this month.