To say it straight away: The stock of the Deutsche Bank is actually not one of my favorites in the U.S. There have been too many scandals over the last few years. But ultimately, everything is a matter of evaluation and moves purposefully in the highly attractive area. Why this is in my view and how it is likely to continue, I try to explain in the following compact.
A new financial year has come to an end and Deutsche Bank is once again in the red. The chief renovator John Cryan does not seem to be moving forward . Nevertheless, the management for his services should again be rewarded richly with bonus payments.
This causes outrage: Matthias Zimmer (CDU) sees the “legitimacy of the economic system” in danger and SPD man Thorsten Schäfer-Gümbel complains that are deleted in the small workers jobs, while the large earners reach into the pots. You can not explain that to anyone.
Somehow they are right. However, the compensation systems have been codified by the Supervisory Board and approved by the shareholders’ meeting. Apparently they think it’s ok, because you have to be attractive for the “high-potentials”. Anyway, lamenting does not help anymore.
The point with the red numbers is also double-edged. It is also true that the pre-tax result for 2017 will be positive. Only special effects due to the tax reform in the US are depressing the result, as with many competitors. On the other hand, it is positive that less taxes will have to be paid in the future.
How it continues now
In the wake of renewed turmoil, the stock price has returned a good portion of its gains since the mid-September low. Add to this the problems of the dodgy “anchor shareholder” HNA Group. If this does not get their alleged liquidity problems solved, then emergency sales are pending. That could significantly impact the share price.
Clever hedge funds have already positioned themselves for this case: AQR Capital Management has already sold 1.32% of its stock and Bridgewater Associates increased to 0.51%. There may be more to join, adding to the pressure on the price.
Since the game of dodgy and shrewd groups of investors on the operating business has no influence at all, may soon be good entry opportunities.
The Frankfurt financial services provider is now still worth $33.75 billion, a clear discount on the so-called core capital and less than half of the book value. If, like most analysts, one assumes that solid profits are being written back from now on, then it might be worthwhile putting Deutsche Bank on the watch list.