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Deutsche Bank's Bad Bank Plan Doesn't Impress Analysts

Deutsche Bank's Bad Bank Plan Doesn't Impress Analysts

(Bloomberg) -- Deutsche Bank AG jumped on reports the lender is moving ahead with an overhaul, mulling an exit from U.S. equities trading while creating a non-core unit to wind down as much as 50 billion euros ($56 billion).

The stock climbed 4% on Monday, supporting European banks, with the sector benchmark the top industry group in the region. Analysts welcomed the new plan, but cautioned it isn’t ambitious enough and may come too late.

Deutsche Bank's Bad Bank Plan Doesn't Impress Analysts

Here’s what analysts are saying:

SOCIETE GENERALE (Andrew Lim)

  • Deutsche Bank’s plan isn’t aggressive enough, Societe Generale analyst comments in a note referring to a FT report, saying the plan “looks far too modest”
  • The plan leaves the lender exposed to material losses from its CIB unit that “could ultimately force ECB resolution”
  • Bank should opt for deleveraging nearly all trading assets in the CIB, or ~EU135 billion of risk weighted assets
  • Reiterates sell rating and PT EU5.50

RBC Capital Markets (Anke Reingen)

  • The creation of a bad bank won’t lead to a “meaningful re-rating”
  • “Any action to improve profitability should be supportive for the shares in the near term,” but will take time to translate into profitability for the bank

CMC MARKETS UK (Michael Hewson)

  • There’s no question that management needs to act, the problem is they are “already well behind the curve” meaning this may well “have been left too late.”

BLOOMBERG INTELLIGENCE (Jeroen Julius)

  • The creation of a bad bank could be positive for most credit investors, giving the bank a more sustainable mix and improving weak profitability
  • Equities and rates trading outside continental Europe could be shrunk and more emphasis put on transaction/private banking

--With assistance from Hanna Hoikkala and Sam Unsted.

To contact the reporter on this story: Macarena Munoz in Madrid at mmunoz39@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Monica Houston-Waesch, Celeste Perri

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