Credit Suisse Downgrades Deutsche Bank On 'Overly Optimistic' Expectations

Credit Suisse on Tuesday issued a report on

, downgrading the financial services company from Outperform to Neutral and lowering its price target from $35 to $33.50. Analysts Mohamed Souidi and Carla Silva wrote, "DBK's current capital allocation overstates the IB RoE but when using 'go-to' requirements (max. of 11.5 percent RWAs/3.5 percent CET1 leverage), PBC and CB&S RoE are not dissimilar (9.3 percent vs. 8.9 percent). In terms of shareholder value, it is not obvious which business should be allocated more capital at the expense of the other. We see moderate incremental value in a radical restructuring, and think expectations could become overly optimistic." Credit Suisse has concerns over the amount of capital at Deutsche Bank's disposal. However, with the IPO of Postbank and sale of Hua Xia, these concerns should be at least partially alleviated. Those deals would free up over €7.7 billion in capital. Analysts believe that Deutsche Bank's management has to decide which business line should be allocated more capital at the expense of the other. This could result in a radical shift in strategy with a refocus of the group on investment banking activities and a partial or full disengagement from retail businesses. Shares of Deutsche Bank recently traded at $34.61, down 1.03 percent.