Deutsche Bank Q2 beats estimates, RBC maintains “outperform” despite headwinds

Investing.com – Deutsche Bank (ETR:DBKGn) (DBK) reported a positive set of Q2 results that exceeded analyst expectations for net profit and pre-tax profit, as per a report by RBC Capital Markets. This upbeat performance was driven by strong revenue growth across all business divisions.

Strong revenue growth across core businesses:

Analysts at RBC flag the broad-based revenue growth achieved by DBK in Q2. Investment Banking, Corporate Banking, and Asset Management all delivered revenues exceeding consensus estimates. Private Banking revenues were in line with expectations.

The note also flagged the broad-based revenue growth achieved by DBK in Q2. Investment Banking, Corporate Banking, and Asset Management all delivered revenues exceeding consensus estimates. Private Banking revenues were in line with expectations.

Cost control efforts on track:

Adjusted costs for Q2 showed no significant change compared to Q1 and remain on track to meet the previously established full-year target of EUR 20 billion.

Higher loan loss provisions, but stabilization expected:

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 potential decline in provisions in H2.

Healthy capital adequacy ratio:

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

Price Target:

RBC sets a price target of EUR 17.75 for Deutsche Bank (DBK) using a valuation approach consistent with its peers, factoring in DBK's projected 2025 performance and a 12.5% cost of equity. This target aligns with their "Outperform, Speculative Risk" rating. 

2024 Guidance:

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

Costs: Both the adjusted costs target of EUR 20 billion and the non-interest expenses target of EUR 20 billion are unchanged.

Loan Losses: The guidance for loan losses has been increased to slightly above 30 basis points of average loans, which is still in line with the consensus estimate of 33 basis points.

Dividends: The absolute DPS (dividend per share) of EUR 0.68 for FY 2024 and EUR 1 per share for FY 2025 is reiterated. A second buyback in 2024 is considered unlikely.