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Market Insights

Confident about European Banks, what’s your next trade?

Daily insight

Market Talk

Leadership at the ECB suggests that the worst of the recent banking “crisis” is over for Europe

Key points to note

  • The situation is that the European Central Bank (ECB) still has to win the inflation battle, higher rates for the eurozone are still on the table
  • According to the ECB, the banks under their supervision are well capitalized
  • The ECB has a lot of tools that they could still use if the situation with the banks get really out of hand (not sure how these tools will affect the EURO or EU stock markets), but the ECB does control the money supply

What about if more banks fail?

By now your bank would have failed already, so if your bank is still open today then they will most likely remain open tomorrow.

  1. Regulators and Investors are not blind, analysts understand the risk of the banks they cover
  • The weak banks are already known in the market, the collapse of SVB bank, and the failures at Swiss bank Credit Suisse were a shock. The shock was more about how fast these events happened, but not a surprise for those who had knowledge of the problems.

Why is the market “bullying” Deutsche Bank?

DB is an easy target when banking fears hit the news wires since the bank has had more “scandals” reaching the headlines than other EU banks during the past few years

  • DB lost its credibility with its customers and regulators. Pre-2008 the bank bought a lot of really low-end US mortgage back bonds, dressed them up to look better, then sold them to investors who ultimately lost all their money. DB later had to pay a few billion in fines.
  • In 2015 DB got into more trouble for money laundering while getting involved with Russia and DB ended up getting used by Russians to launder at least $10 billion. The bank paid another big fine.
  • In 2021 DB gets into trouble with regulators again for selling unsophisticated customers unsuitable risky products
  • Since 2020 The bank has been going through an ongoing restructuring after massive losses during previous years

Every crisis needs villains to punish so the regulators and governments can show the “people” that they are doing their job.

The -20% sell-off in DB shares could or could not be a market overreaction, but at the same time because of DB’s track record, DB could be an easy target for regulators and governments to accuse of being responsible for whatever is happening across the banking sector at the moment.

Deutsche Bank +8% last five months despite the crisis

Month DB % Change
March 2023 -20.22%
February 2023 -6.88%
January 2023 +16.15%
December 2022 +8.37%
November 2022 +10.96%

How does DB stand next to its competitors?

Deutsche Bank Ag JP Morgan Chase & Company Bank of America Corp
20-Day Average Volume 8,551,835 21,306,150 95,401,758
Previous Close 9.65 128.88 28.12
Industry Banks - Foreign Banks - Major Regional Banks - Major Regional
5-Day %Change -3.31% 1.54% 3.73%
1-Month %Change -20.22% -9.91% -16.41%
3-Month %Change -11.57% -2.51% -12.51%
Market Capitalization 19,944,358 379,339,584 225,067,968
Annual Sales 39,540,550,000 154,792,000,000 115,053,000,000
Annual Net Income 5,710,510,000 37,676,000,000 27,528,000,000
Last Quarter Sales 11,023,770,000 47,409,000,000 34,926,000,000
Last Quarter Net Income 1,841,040,000 11,008,000,000 7,132,000,000
Earnings per Share (Most Recent) 0.35 3.57 0.85
Last Earnings Date 2/2/2023 1/13/2023 1/13/2023
Latest Earnings Date 4/26/2023 4/14/2023 4/18/2023
Most Recent Dividend 0.211 1 0.22
Dividend Date 5/19/2017 1/5/2023 3/2/2023
Ex-Dividend Date 5/19/2017 4/5/2023 3/2/2023
Price/Earnings ttm 5.18 10.64 8.93

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Today’s Economic Events

Time: UTC Country/Region Economic Indicator Previous Forecast Actual Units
7:00:00 AM Spain HICP (p) m/m (inflation) 0.9 2.2 1.1 %
7:00:00 AM Spain HICP (p) y/y (inflation) 6 4.1 3.1 %
7:00:00 AM Switzerland KOF Economic Barometer 100 100.5 98.2 -
12:00:00 PM Germany HICP (p) m/m (inflation) - 0.8 - %
12:00:00 PM Germany HICP (p) y/y (inflation) 9 8 - %
12:30:00 PM United States GDP annualized QQ 2.7 2.7 - %
12:30:00 PM United States Initial Jobless Claims 191 200 - %
2:30:00 PM United States Natural Gas Stocks w/w -72 -56 - Bcf

Technical Commentary

Deutsche bank Current price at $9.94 and remains above its 52 week low ($7.52), 20 day moving average analysis is negative, MACD oscillator analysis is negative, relative strength seems to be attempting to recover from oversold conditions. Short sellers could be aiming for a retest of the 52 week lows near $7.52, while buyers could be speculating that relative strength will continue to turn higher and attract technical traders into new long positions on bets that price will recover over the long term (100+ days).

Not investment advice. Past performance does not guarantee or predict future performance.