Morningstar | We Maintain Our Fair Value for DBK After Weak 1Q Results
With this report update, we maintain our no-moat and negative moat trend ratings. We also attach a very high uncertainty rating to Deutsche Bank shares, driven by Deutsche’s ongoing restructuring plan and the operational and execution risk stemming from it. We retain our Poor stewardship rating as a result of the CEO change. Along with first-quarter 2018 results, new CEO Christian Sewing announced new plans about the restructuring, which we think in some aspects are fairly similar to previously announced plans and are insufficiently convincing to ease our concerns over profitability. In our view, the details provided are limited. As per these plans, by 2021, the bank is hoping to increase utilisation of its private and commercial bank business, as well as its DWS asset management business. Within the corporate and investment banking segment, or CIB, the bank hopes to adjust its focus to Europe from the U.S. by scaling back on its U.S. rates sales and trading business. In addition, management has decided to cut down on its global equities business, which means further reduction in revenue. Although we see the cost-cutting targets as realistic in the medium term, we think revenue generation and earnings stability will be too hard to achieve in the short term. Realignment of business and reduction in CIB should result in revenue declines; hence, we expect pressure on management will continue and winning back the trust of shareholders will be delayed to a later date. Its cost target for 2019 now stands at EUR 21.8 billion, after it achieved its target of EUR 23 billion in 2018.Deutsche Bank is a holding company acting as an international financial service provider. Co. offers a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world. Co. has operations or dealings with existing or potential customers in most countries in the world. Co. is organized into the following six corporate divisions: Global Markets (GM); Corporate & Investment Banking (CIB); Private, Wealth & Commercial Clients (PW&CC); Deutsche Asset Management (Deutsche AM); Postbank (PB); and Non-core Operations Unit (NCOU).
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