Wall Street

Deutsche Bank’s grades have been raised for the first time since restructuring

Summary

What Deutsche Bank’s Restructuring Means for the Firm, Banking Industry Description video: Jul.08 — Deutsche Bank AG’s latest restructuring plan will trim 18,000 jobs while shuttering the bank’s equities trading business. Bloomberg’s Sonali Basak and Bloomberg Intelligence’s Alison Williams examine […]

What Deutsche Bank’s Restructuring Means for the Firm, Banking Industry

Description video:
Jul.08 — Deutsche Bank AG’s latest restructuring plan will trim 18,000 jobs while shuttering the bank’s equities trading business. Bloomberg’s Sonali Basak and Bloomberg Intelligence’s Alison Williams examine the plan on \”Bloomberg Surveillance.\”

Deutsche Bank’s grades have been raised for the first time since restructuring

Analysts at UBS changed their recommendation on the German bank’s stock from sell to hold and raised the 12-month target price from € 5.70 ($ 6.42) per share to € 6.60, assuming the new strategy will lead to a more balanced ratio of risk and reward.

Deutsche Bank's grades have been raised for the first time since restructuring

UBS becomes the first market player to revise its outlook for Deutsche Bank shares following the start of its massive restructuring program.

UBS analysts Daniele Bruppbacher, Mate Nemes and Nicole Marun have suggested that Deutsche Bank will continue «more aggressive cost cuts, regulatory support could potentially lead to lower capital requirements».

Deutsche Bank will cut 18,000 jobs by 2022 and close its global stock trading and trading business. The bank plans to cut costs by 25% while growing core revenues by 10% over four years without a capital increase, which some Wall Street analysts called too much. «radical» and «ambitious», but UBS disagrees with this assessment.

«The plan demonstrates the readiness and determination to change the profile of Deutsche Bank, in our opinion, the regulator will contribute to this, – the analytical note says. – This is an attempt to break out of the circle of self-sufficiency in debt / shares».

Analysts determined that the risk of a necessary capital increase is limited and concluded that instead, the most important factor for the bank will be the growth of basic income..

Analysts suggested that the bank’s announced restructuring steps demonstrate «willingness to change», recognizing that «the operating environment is not improving and the strategic options are limited».

According to analysts, weak profitability could push Deutsche Bank to take more radical measures in relation to costs, to a possible merger or acquisition, exit from the market or capital increase..