Analyst Note| Niklas Kammer, CFA |
We maintain our EUR 9 per share fair value estimate after Deutsche Bank closed a solid year 2020. Full-year profits of EUR 624 million versus a EUR 5.2 billion loss the year prior has been a strong performance, although questions remain on the sustainability of its regained earnings power. Breaking down revenue by segment, Deutsche’s investment bank has been the breadwinner in an otherwise soft top-line performance. The investment banking division, carried by a strong industry tailwind in fixed income, currency sales and trading as well as debt and equity origination, raked in 32% higher revenue vis-à-vis last year. This allowed for a 4% revenue growth on a group level, more than offsetting low-single-digit revenue declines in the remaining segments. Going forward, as we anticipate the divergence of revenue growth to invert to more normalized levels, we expect a slight slump over the next couple years before recovering in the medium term. All that being said, concerns we initially had of Deutsche Bank undergoing its sizable restructuring program during a pandemic were misplaced and we think the group continues to right its ship. Thanks to the tailwind in the in its investment bank, Deutsche steamed ahead in cutting its cost base and hitting its cost target of EUR 19.5 billion. On balance, Deutsche is performing to expectations on issues that are in management’s control, which is a break from its not-so-distant past. As such, we view its 2020 performance as good. Our no-moat and stable trend ratings are unchanged.