Deutsche Bank Is Fading Away, Not Turning Corner, Berenberg Says

(Bloomberg) -- Deutsche Bank AG is not turning a corner and its battered shares have even further to fall, according to Berenberg Bank analyst Eoin Mullany.

Germany’s largest bank is “slowly fading away,” and its key business is in structural decline, Mullany said in a note to clients Thursday. It’s unlikely to ever hit management’s medium-term target of a 10 percent return on equity. He cut his 12-month price target for the stock to 8 euros from 12 euros.

That’s at the very bottom of the range of analysts’ estimates for the stock’s value, according to data compiled by Bloomberg. Analysts at Barclays Plc, Societe Generale SA and Royal Bank of Canada have the same target price. Deutsche bank was down 1.6 percent at 9.80 euros in Frankfurt trading as of 9:42 a.m. The stock, which hit an all-time low of 8.75 euros in June, has plunged by 38 percent this year.

Mullany said that the bank is still losing market share in corporate and investment banking, and said “it’s hard to see” how it will reverse that trend. Plans to cut leverage will only further expose its weak underlying profitability, he said.

Mullany saw a big difference between Deutsche Bank and European peers that have reinvented themselves since 2008, with scaled-back ambitions in investment banking. He argued that UBS Group AG, Credit Suisse Group AG and Royal Bank of Scotland Plc all have strong core businesses to fall back on, either in retail banking or wealth management.

“Deutsche Bank does not have this, in our view,” Mullany said. While a merger with Commerzbank AG could strengthen its retail and commercial banking, he saw it as “unlikely” and a “last option.”

To contact the reporter on this story: Geoffrey Smith in Frankfurt at gsmith325@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Jon Menon

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