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Why Is Deutsche Bank (DB) Down 4.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Deutsche Bank (DB - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Deutsche Bank due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Deutsche Bank Q2 Earnings Rise Y/Y on Lower Expenses
Deutsche Bank’s second-quarter 2021 net income of €828 million ($997.5million) increased substantially from the year-ago quarter’s €66 million. Also, the German lender reported profit before taxes of €1.17 billion ($1.4 billion) compared with the year-ago quarter’s €158 million.
The quarterly results benefited from a decline in expenses. The company’s strong capital position was a tailwind. Further, a decline in provision for credit losses was another positive.
Revenues Fall, Costs & Provisions Decline
The bank generated net revenues of €6.23 billion ($7.51 billion) in the second quarter, down marginally, year over year. This downside primarily resulted from lower revenues in the investment bank and corporate bank segments. Provision for credit losses came in at €75 million ($90.3 million), tanking 90% from the €761 million reported in the year-ago quarter.
Non-interest expenses of €4.9 billion ($6.02 billion) slid 6.9% from the prior-year quarter on fall in all components. Excluding transformation-related charges, the bank reported adjusted costs of €4.6 billion ($5.53 billion), down 6%.
Segmental Performance
Net revenues at the Corporate Bank division of €1.23 billion ($1.48 billion) declined 8% from the year-ago quarter. Lower revenues in all components of corporate bank services led to this downside.
Investment Bank’s net revenues totaled €2.34 billion ($2.82 billion), down 11% year over year. Lower revenues from origination and advisory, and other, resulted in this decline.
Private Bank reported net revenues of €2.02 billion ($2.43 billion), up 3% year over year. Higher revenues from International Private Bank revenues drove this upswing.
Asset Management generated net revenues of €626 million ($753.7 million), up 14% year over year, mainly aided by an increase in management fees. Net asset inflows during the quarter were €20 billion ($24.1 billion).
Corporate & Other reported negative net revenues of €7 million ($8.5 million) compared to negative net revenues of €173 million reported in the prior-year period.
Capital Release reported negative net revenues of €24 million ($28.9 million) compared with negative net revenues of €66 million seen in the year-earlier period, reflecting the impact of risk management, funding charges and de-risking costs.
Capital Position
Deutsche Bank’s CET1 capital ratio (fully loaded) came in at 13.2% as of Jun 30, 2021, down from the year-ago quarter’s 13.3%. Leverage ratio, on an adjusted fully-loaded basis, was 4.8%, up from 4% in the year-ago quarter.
Risk-weighted assets (RWA) increased €15 billion in the second quarter to €345 billion ($415.4 billion) sequentially.
Outlook 2021
The company has accelerated its target of more than €200 billion in cumulative ESG financing and investments from 2025 to 2023, and set a target of at least €100 billion for the end of 2021.
Net interest margin is anticipated to stabilize at slightly more than 1%.
Group revenues are expected to be essentially flat year over year on €24 billion.
Corporate Bank revenues are expected to be essentially flat year over year. It is well on track to generate around €300 million on an annualized basis.
The Capital Release Unit is expected to report negative revenues.
The company expects to be at or ahead of its 2022 targets for RWA and leverage exposure by year-end 2021. This includes completing the transition of its Prime Finance platform. This transition is expected to release approximately €25 billion of leverage by the end of the year.
Corporate & Other segment will continue to be affected by valuation and timing differences on positions that are economically hedged but do not meet the accounting requirements for hedge accounting. The unit will also be hurt by certain transitional costs relating principally to changes in internal funds transfer pricing framework, which are expected to be around €250 million in 2021.
Management expects provisions in a range of around 20 basis points of average loans for 2021 and expects some of the benefit to carry over into 2022.
Increase in its contribution to the German statutory deposit guarantee scheme is expected to be roughly €70 million in 2021 and approximately €60 million per year thereafter until 2024.
Medium-Term Target (2022-end)
For the Group, post-tax return on tangible equity (RoTE) of 8% is targeted by 2022.
For the Core Bank, Deutsche Bank anticipates post-tax RoTE target of above 9% in 2022. Cost income ratio of 70% is expected.
Management expects net revenues to be ahead of guidance provided at the Investor Deep Dive on December 9, 2020.
Management believes approximately €400 million in total to be added to its expense base.
CET 1 capital ratio is anticipated at greater than 12.5%. Also, leverage ratio is likely to be about 4.5%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
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Why Is Deutsche Bank (DB) Down 4.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Deutsche Bank (DB - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Deutsche Bank due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Deutsche Bank Q2 Earnings Rise Y/Y on Lower Expenses
Deutsche Bank’s second-quarter 2021 net income of €828 million ($997.5million) increased substantially from the year-ago quarter’s €66 million. Also, the German lender reported profit before taxes of €1.17 billion ($1.4 billion) compared with the year-ago quarter’s €158 million.
The quarterly results benefited from a decline in expenses. The company’s strong capital position was a tailwind. Further, a decline in provision for credit losses was another positive.
Revenues Fall, Costs & Provisions Decline
The bank generated net revenues of €6.23 billion ($7.51 billion) in the second quarter, down marginally, year over year. This downside primarily resulted from lower revenues in the investment bank and corporate bank segments.
Provision for credit losses came in at €75 million ($90.3 million), tanking 90% from the €761 million reported in the year-ago quarter.
Non-interest expenses of €4.9 billion ($6.02 billion) slid 6.9% from the prior-year quarter on fall in all components. Excluding transformation-related charges, the bank reported adjusted costs of €4.6 billion ($5.53 billion), down 6%.
Segmental Performance
Net revenues at the Corporate Bank division of €1.23 billion ($1.48 billion) declined 8% from the year-ago quarter. Lower revenues in all components of corporate bank services led to this downside.
Investment Bank’s net revenues totaled €2.34 billion ($2.82 billion), down 11% year over year. Lower revenues from origination and advisory, and other, resulted in this decline.
Private Bank reported net revenues of €2.02 billion ($2.43 billion), up 3% year over year. Higher revenues from International Private Bank revenues drove this upswing.
Asset Management generated net revenues of €626 million ($753.7 million), up 14% year over year, mainly aided by an increase in management fees. Net asset inflows during the quarter were €20 billion ($24.1 billion).
Corporate & Other reported negative net revenues of €7 million ($8.5 million) compared to negative net revenues of €173 million reported in the prior-year period.
Capital Release reported negative net revenues of €24 million ($28.9 million) compared with negative net revenues of €66 million seen in the year-earlier period, reflecting the impact of risk management, funding charges and de-risking costs.
Capital Position
Deutsche Bank’s CET1 capital ratio (fully loaded) came in at 13.2% as of Jun 30, 2021, down from the year-ago quarter’s 13.3%. Leverage ratio, on an adjusted fully-loaded basis, was 4.8%, up from 4% in the year-ago quarter.
Risk-weighted assets (RWA) increased €15 billion in the second quarter to €345 billion ($415.4 billion) sequentially.
Outlook 2021
The company has accelerated its target of more than €200 billion in cumulative ESG financing and investments from 2025 to 2023, and set a target of at least €100 billion for the end of 2021.
Net interest margin is anticipated to stabilize at slightly more than 1%.
Group revenues are expected to be essentially flat year over year on €24 billion.
Corporate Bank revenues are expected to be essentially flat year over year. It is well on track to generate around €300 million on an annualized basis.
The Capital Release Unit is expected to report negative revenues.
The company expects to be at or ahead of its 2022 targets for RWA and leverage exposure by year-end 2021. This includes completing the transition of its Prime Finance platform. This transition is expected to release approximately €25 billion of leverage by the end of the year.
Corporate & Other segment will continue to be affected by valuation and timing differences on positions that are economically hedged but do not meet the accounting requirements for hedge accounting. The unit will also be hurt by certain transitional costs relating principally to changes in internal funds transfer pricing framework, which are expected to be around €250 million in 2021.
Management expects provisions in a range of around 20 basis points of average loans for 2021 and expects some of the benefit to carry over into 2022.
Increase in its contribution to the German statutory deposit guarantee scheme is expected to be roughly €70 million in 2021 and approximately €60 million per year thereafter until 2024.
Medium-Term Target (2022-end)
For the Group, post-tax return on tangible equity (RoTE) of 8% is targeted by 2022.
For the Core Bank, Deutsche Bank anticipates post-tax RoTE target of above 9% in 2022. Cost income ratio of 70% is expected.
Management expects net revenues to be ahead of guidance provided at the Investor Deep Dive on December 9, 2020.
Management believes approximately €400 million in total to be added to its expense base.
CET 1 capital ratio is anticipated at greater than 12.5%. Also, leverage ratio is likely to be about 4.5%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.