Tuesday 30 July 2013

Deutsche Bank report Q2 2013

Deutsche Bank a German financial company

Deutsche Bank came out with their half year report this morning and in it is not being accepted very well by the market. As I understood from the news that I read the main reason was that the earnings were lower then expected. The reason for why the net earnings was lower was based on two things:

1. They still have to push up their capital even though they brought in money by making 90 million new shares and selling that to institutes one would have hoped that to be enough.
2. They had to set even more money aside for litigations and future legal complications... sad... (it is now up at 3 billion euro).

One could maybe hope that they will not need all the 3 billion euro and that it will be brought back however should one really hope on that? My hope is that they will stop to do stupid moves with a small benefit in the short run but huge costs in the long run but I guess that is too much to ask for. A second matter there would be who is and who should be held responsible? Is it only the CEO? I strongly doubt that the current CEOs were not fully aware of the illegal things happening... maybe even more so than the previous CEO. When there are too many problems in a company one must just let the heads roll and bring in new fresh blood and not hire from the ranks.

So... back to the earnings report. Below is the financial statement by DB as taken from the report found at the link above.

Unaudited consolidated financial statement

What we can see is in my opinion not bad. At least it is not worse then what they were doing last year and then they made the beautiful manoeuvre of booking a loss of -2.5 billion euro in the final quarter of 2012. If they can keep this year running without one of those "pretty" book keeping moves then I will be happy.

For the half year the revenue has decreased by almost 25% however their costs has decreased by at least equally much so I do not see that as a major problem.

According to them the highlights were:

Group highlights
  • Net income of EUR 335 million; diluted earnings per share of EUR 0.32
  • Income before income taxes (IBIT) of EUR 792 million includes litigation related charges of  EUR 630 million
  • Net revenues were EUR 8.2 billion; Core Bank revenues increased by 5% year over year to EUR 8.0 billion
  • Post-tax return on average active equity of 2.4% for the Group and 7.0% in the Core Bank

They are also proud to have reached the Basel 3 Common Equity Tier 1 capital ratio of 10% which is specifically mentioned by the CEO.

Conclusion: This report changes nothing for me and I will continue to own my shares in Deutsche Bank. I personally find the half year report less bad than the market but it still makes one wonder how much money will they actually have to but aside for the litigations. Due to the Q4 in 2012 the running P/E is extremely high for Deutsche Bank.

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