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Deutsche Bank (NYSE:DB) stock price has done well in the past few years. It has rallied by over 44% in the past five years, outperforming the S&P KBE Index (KBE), which has barely moved in the same period. The stock is up by about 10% this year, also higher than other banks.
Deutsche Bank has underperformed several European banks like Unicredit, Societe Generale, Commerzbank, UBS, and BNP Paribas. However, the fact that the company’s stock is doing well is remarkable since the company came to a near-death experience a few years ago.
Deutsche Bank vs KBE, Commerzbank, BNP Paribas, and Unicredit
Like other giant banks, Deutsche Bank went through a period of turmoil after the Global Financial Crisis in 2009. In the aftermath, the company raised over 10.2 billion euros in 2010 to shore its balance sheet.
Shortly afterward, CEO Josef Ackermann retired and was replaced by Anshu Jain, who then raised another 8.5 billion euros. The company then received a $2.5 billion fine for the Libor-rigging scandal as John Cryan became the CEO.
Deutsche Bank then raised an additional 8.5 billion euros to shore its balance sheet and pay a $7 billion fine to US regulators. Christian Sewing then replaced John Cryan after the company continued incinerating cash.
Christian Sewing, who was at the bank for decades, has led the company well and returned it to profitability. In 2019, Sewing led the bank as it exited its global equities business as it struggled to compete with the likes of Goldman Sachs and Morgan Stanley.
The company has also announced huge layoffs in a bid to control costs. It recently announced plans to shut down most of its PostBank branches as its investments in digital starts to pay off.
Deutsche Bank’s business is starting to improve. Its annual revenue plunged from a peak of $46.32 billion in 2011 to a low of $25.67 billion in 2019. Revenue then jumped to $27 billion in 2020 and $30.12 billion in the trailing twelve months.
Most importantly, Deutsche Bank, which is now leaner than it was before Sewing, has become a highly profitable company. It has achieved net profits in all quarters since Q1’20.
According to SeekingAlpha, the company moved from a net loss of over $6 billion in 2019 to an annual profit of $604 million in 2020. Net profit jumped to $2.6 billion in 2021 and $5.9 billion in 2022. It has made over $5.6 billion in the trailing twelve months.
In the most recent results, Deutsche Bank said that its net revenue in the first nine months of the year rose by 6% to 22.2 billion euros. This revenue growth was mostly because of higher interest rates, which pushed its net interest income sharply higher. Its Common Equity Tier 1 (CET1) capital ratio rose to 13.9% from the previous 13.8%.
Analysts are generally optimistic about the Deutsche Bank stock price. The average estimate for the stock in New York is about $14, which is higher than the current $12. Analysts believe that the company can become a more profitable company.
Watch here: https://www.youtube.com/embed/UDSg0x2CudQ?feature=oembedThe post How Christian Sewing engineered Deutsche Bank’s turnaround appeared first on Invezz
