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RBC Sees Deutsche Bank Unlikely To Re-Rate, Downgrades To Sector Perform

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RBC Capital Markets analyst Fiona Swaffield sees little scope for Deutsche Bank (NYSE: DB) to re-rate. As a result, the analyst downgraded the stock to the Sector Perform from Outperform rating on shares. Similarly, the brokerage slashed its price target to Euro 19.00 from Euro 24.00.

Swaffield believes progress on capital was reliant on a Postbank disposal, where timing was uncertain and the expectation of a return to dividend payments has been pushed out. The analyst added, "Any resolution of major litigation issues would be a positive but civil litigation is likely to take time to resolve. The valuation is discounted but until more progress has been made on capital, DBK is unlikely to re-rate."

The RBC Capital analyst indicated there was no Postbank disposal before the end of the 2017. The brokerage estimate a CET1 ratio of 11.0 percent, below the 11.76 percent SREP requirement from January 1, 2018. As a result, the analyst guided DBK reaching a CET1 ratio of 12.8 percent by 2018.

The brokerage also sees US RMBS and the Russian equities investigation to be the biggest outstanding issues and settlements would eliminate a key uncertainty.

"Having said that, civil litigation is likely to hang over the Investment Banks as a group for some time and is difficult to quantify. P&L - cost progress but revenue offset Consensus downgrades have driven bank share prices YTD. We are 9% and 4% below consensus for adjusted pre-tax for 2016 and 2018."

The analyst was encouraged by some recovery in European DCM market share in Q2 as revenues are expected to remain under pressure from the restructuring process. Swaffield said that the price objective was driven by lower forecasts.

On Thursday, the stock traded 0.71 percent down.

Latest Ratings for FB

Jan 2019Raymond JamesMaintainsOutperformOutperform
Jan 2019NomuraMaintainsNeutralNeutral
Jan 2019Deutsche BankMaintainsBuyBuy

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Posted-In: Fiona Swaffield RBC Capital MarketsDowngrades Price Target Analyst Ratings


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