Deutsche's Woes

When Will the Shine Return?

Closer winder cleaning DB DPA
Washing off the gunk.
  • Why it matters

    Why it matters

    Deutsche Bank CEO John Cryan’s success or failure in turning around Deutsche Bank will be measured largely by the share price, which has languished for years.

  • Facts

    Facts

    • The appointment of John Cryan as the bank’s new CEO in July initially raised expectations in the market.
    • About 55 percent of analysts have a “hold” recommendation on Deutsche Bank’s shares, one third believe the bank is a good buy, while the remainder advise investors to hold off.
    • Shares are trading at a four-year low, but analysts expect the share price to rise about 25 percent over the coming year.
  • Audio

    Audio

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For the novice investor, shares in Deutsche Bank seem like a good buying opportunity. At the end of 2015, a share in the powerful bank, Germany’s largest financial institution, can be had for only €22.52 ($24.37). It marked the lowest price in more than four years.

Europe’s largest investment bank, based in the financial capital of Europe’s largest economy, is being traded at only 40 percent of its asset value. In other words, the bank’s net assets are more than double their market value.

It’s perhaps the clearest sign of just how far Deutsche Bank has fallen from grace in recent years. With the bank set for a major downsizing in the coming years, investors seem to believe the business outlook for Deutsche Bank is extremely bleak and fear losses that will eat into its capital resources.

This stems from two key fears for 2016: Thousands of legal cases and regulatory investigations still pending could lead to billions of euros in fines and settlements; and a deep restructuring of the bank’s operations, reducing the bank’s global footprint, could leave it with no growth opportunities or areas to make a solid profit in the future.

John Cryan, the bank’s new co-chief executive since July of last year, clearly has his work cut out for him.

And yet there is some hope. The 38 analysts surveyed regularly by Bloomberg believe that the share price could increase by an average of nearly 25 percent, to €28.08, within the next 12 months.

Hardly any other share on Germany’s benchmark DAX index of its 30 largest companies has as much potential at the moment.

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