Wednesday 30 April 2014

Deutsche Bank (DB) report Q1 2014

front page, DB, report, Q1, 2014

When I was looking over this report there was a children phrase that jumped into my mind and it goes "Liars, liars, pants on fire" the severity of this problem is different if you follow the American use of the word pants or the British one and in my opinion the good one to use here is the British one. To my huge surprise the stock market responded to this report from Deutsche Bank with standing ovations and the shares increase by +2.18%. Insanity!

As some of you have maybe noticed over time I can become very upset with the companies that I own and I then very frequently also spill my guts on them. In most cases I think I am correct in doing this but please do not misunderstand me. Even though I do puke on them because I find what they (the management) do completely revolting but I still believe in the company and them having a bright future many, many years from now. Part of the contrarian approach is simply that I every now and then will be forced to wait until the current crooks of a management gets a horse head in their beds which makes them walk away (usually with a nice bonus I am sure) and then the company can get back on their feet again. This is the risk I take by only looking at the figures and removing the current management, future products, future markets etc. from the equation. By this I mean that this approach is not for everyone and even though many feelings are ventilated I simply will not sell a company that are no even close to the value that they should have. For the full DB report Q1 2014 use this link.

So... what did they then show in their report that made my so angry? Well let us start with this table below. So they have -11% revenue from last year. Woow that is great! We must run and buy more stocks in this great company! They keep on with their annoying bonk about Noninterest expenses! Stop it! As a company any expense is of course non interesting (Noninterest as they call it) so just stop pissing around and accept the costs! What I love in this table is the C/I value they have managed to push that to 77% which is still not even half of what a profitable bank has but much better than before.

DB, Q1, 2014, result

But then I started reading a little bit more and also I found it strange that they had 71% for Q1 2013 that sounds really nice... too nice maybe even... and then I found this in the report. So first of all... what does the 77% for Q1 2014 mean when they report in the table of "adjusted costs" that it is 71% hmmm... 6% with a little adjustment that sounds... disturbing... I know that this calculation is not 100% correct but by just adding the C/I together in this "cost adjusted" table for full year 2013 then we receive an average of 73.25% but, but... 73% C/I did they not report something very different back in the full year report for 2013? See Deutsche Bank annual report 2013 and in there we can see that DB was sooo proud to inform us that they had reached the great figure of a C/I of 89% for full year 2013 which was down from the 92.5% in full year 2012 that they had had before and now all of a sudden they are down at well below 80% with their adjusted costs? These guys are so full of whateverItake morethan5minutesinthetoilettoproduce that I do not even know where to begin.

DB, adjusted, costs, Q1, 2014

I have zero confidence in the current management since they allow these kind of reports to be published. I have no clue why the stock went up today but then again I never even try to pretend that I know when and why it goes up and down like it does no matter if it is DB or any other stock for that matter.

Conclusion: I will continue with my hate/love relationship to Deutsche Bank and I will not sell my shares. I know that they will do well sometime in the future and it is only a waiting game that I must sit out and win. Maybe I should start by buying a horse and see if I can win some money racing with it as an extra income on the side before... please go here for the analysis of DB 2014.


Riskminimeraren said...

I own Commerzbank (I have seen that you do as well) and it looks like they actively are trying to turn that bank around. It will take time, but they are working on it. However, I have stayed away from DB.

I can see that the valuation of DB is low given it's market position. But they have not really started to scale back on staff yet and the costs are very high. In addition, this is a bank that deals with financial weapons of mass destruction. I don't know if this is a credible source but check this out, if reality is even close to this it is scary:

Fredrik von Oberhausen said...

The article you link to is indeed scary.

This is probably also the reason for why we see so little happening in DB. Their main problem is the derivatives exposure. If that cracks it would not matter if they have fired 10,000 employees or not... they would simply go bust with a big bang.