Deutsche Bank Q2 beats estimates, RBC maintains “outperform” despite headwinds By Investing.com

Investment.com – German Bank DBK (ETR:) reported a positive set of second-quarter results that beat analysts’ expectations for net income and pre-tax earnings, according to a report from RBC Capital Markets. The upbeat performance was driven by strong revenue growth across all business divisions.

Strong revenue growth across core businesses:

Analysts at RBC pointed to DBK’s broad-based revenue growth in the second quarter. Investment banking, corporate banking and asset management revenues beat consensus estimates. Private banking revenues were in line with expectations.

The note also noted the broad-based growth in revenues achieved by NBD in the second quarter. Investment banking, corporate banking and asset management revenues exceeded consensus estimates. Private banking revenues were in line with expectations.

Cost control efforts on track:

Adjusted costs for the second quarter showed no significant change compared to the first quarter and remain on track to achieve the previously set annual target of €20 billion.

Loan loss provisions rise, but expected to stabilize:

Loan loss charges came in above consensus, leading to an increase in full-year guidance for these provisions. However, the brokerage notes that the bank expects stabilization and a possible decline in provisions in the second half.

Healthy Capital Adequacy Ratio:

Deutsche Bank’s capital adequacy ratio, as measured by the CET1 ratio, remains above consensus expectations of 13.5%.

Target price:

RBC Bank has set a price target of €17.75 on Deutsche Bank (DBK) using a valuation approach consistent with its peers, taking into account DBK’s expected performance through 2025 and a cost of equity of 12.5%. This target is in line with an “Outperform, Speculative Risk” rating.

Directions for 2024:

Revenue: The revenue target remains at €30 billion, although the bank will need to adjust its quarterly operating rate to achieve this figure.

Costs: The adjusted costs target of €20 billion and the non-interest expenses target of €20 billion remain unchanged.

Loan Losses: Guidance for loan losses has been raised to just over 30 basis points of average loans, which remains in line with the consensus estimate of 33 basis points.

Dividends: Absolute dividends per share of €0.68 for the financial year 2024 and €1 per share for the financial year 2025 have been confirmed. A second share buyback is unlikely in 2024.