Deutsche
Bank
(DB)
shares
are
up
4.5%
this
afternoon
after
the
banking
giant
reported
fourth-quarter
2023
profits
before
tax
of
€698
million
(£59.6
million),
10%
lower
than
a
year
ago,
when
it
posted
an
exceptionally
strong
quarter.
Deutsche
also
disappointed
relative
to
consensus
estimates
collected
by
the
bank
itself
on
revenue
of
€6.658
billion
(2%
below
consensus
estimates)
and
adjusted
costs
of
€5.305
billion
(3%
above
consensus
estimates).
The
reasons
were
a
still-weak
backdrop
for
the
investment
bank
and
its
fixed-income
trading
operation,
as
well
as
the
asset
management
segment
performing
below
expectations.
In
light
of
this,
we
maintain
our
fair
value
estimate
of
€13
per
share.
We
assign
it
no
Economic
Moat
Rating.
Why
Are
Deutsche’s
Shares
up,
Then?
Despite
the
misses
on
revenue
and
expenses
relative
to
consensus
estimates,
Deutsche
has
had
a
decent
year.
Its
post-tax
return
on
tangible
equity
of
7.4%
for
2023
is
still
below
our
cost
of
capital
assumptions
for
Deutsche,
but
we
note
positive
progress
toward
a
more
structurally-sound
income
statement
and
balance
sheet
over
the
last
couple
of
years.
This
progress
is
also
reflected
in
Deutsche’s
ability
to
deliver
shareholder
distributions
based
on
sound
capitalisation
and
improved
profitability.
For
2023,
the
bank
proposed
a
dividend
of
€0.45
per
share.
Deutsche
has
adjusted
its
revenue
guidance
upward
toward
€32
billion
by
2025,
corresponding
to
a
CAGR
between
5.5%
and
6.5%
versus
a
target
of
3.5%
to
4.5%
previously.
Large
chunks
of
the
improved
outlook
are
expected
to
come
from
the
Numis
acquisition.
Deutsche
now
aims
to
become
an
origination
and
advisory
franchise
ranked
between
sixth
and
eighth
globally.
While
we
agree
M&As
have
likely
seen
a
trough
and
should
drive
revenue
growth
in
future,
we
are
concerned
that
these
ambitions
will
increase
cost
levels
as
Deutsche
looks
to
attract
talent.
Key
Morningstar-Metrics
for
Deutsche
Bank
• Fair
Value
Rstimate:
13
EUR;
• Morningstar
Rating:
3
stars;
• Morningstar
Economic
Moat
Rating:
None;
• Morningstar
Economic
Moat
Rating:
Medium.
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