Thursday 11 April 2013

Analysis of Deutsche Bank

The largest German investment bank

Company: Deutsche Bank

Business: Investment banking and classical banking. Sitting as the spider in the web between Asia and the US. Considered to be one of the systemic most crucial banks in the world. But they have been naughty like all the other banks and therefore they have still not published the year report for 2012 since they need to decrease income in 4th quarter due to litigation. *sigh*

Active: All over the world. Europe and particularly Germany is their strongest base. The biggest German bank in terms of customers. I have my stock deposit with them since I found it to be the best one.

P/E: 9.6

The price is from closing day 05.04.12
contrarian values of P/E, P/B as well as dividend

With DB we have a fully acceptable P/E of 9.6 which is below my boarder of 10. They also have a very high book value which one have to question. Especially since one here about some trouble in the US where they might had hidden losses of up to 10 billion $ which meant that they were not forced to take the governmental support. It always amazes me how easy it seems to be to cook the books according to what you want to show the world. It must be changed! Eitherway by applying the Graham formula it is a clear buy. When looking at the debt it is very similar to Commerzbank. The E/S is around 10% which indicates to me that my previous assumption for the potential earnings for Commerzbank should be fairly valid. I used 5% growth also here and we see that in the last five years the growth has only been less than 1% which gives (Graham) a P/E of above 10 and for the 5% growth we get a P/E of 16 from Lynch. The low growth of the last five years has been due to the crisis and it is still not over but most likely the growth will increase.
If they will manage to pay dividends then it will be around 2.5% and it will be less then 25% of the earnings which would be acceptable. We will have to see how much losses they will add to the final quarter of 2012. I suspect that it will be substantial and maybe no dividends will be payed.

Conclusion: I find DB to be a clear buy. The stock is cheap today according to all the calculations and it will turn around in a couple of years.

No comments: