• Revenues were flat which is not bad after three years of decreasing revenues.
• Risk provisions rose from €140m for Q1 19 to €506m for Q1 20.
• Investment Bank could increase its pre-tax profit by 149% to €622m due to the COVID-19 market turmoil.
• Group net income attributable to shareholders was a loss of €43m.
Companies: Deutsche Bank
• Revenues were down by 8% to €23.2bn for FY2019
• Net result attributable to shares was a loss of €5.7bn for FY2019
• Management released no dividend proposal for FY2019
• Transformation-related effects should burden 2020 with €1.4bn
Deutsche Börse (DB1) is a leading European capital markets infrastructure provider across pre-trading, trading and clearing, and post-trade segments. It is following a road map designed to secure faster growth including both organic and M&A elements. At the Q3 stage, the group reported that it is making progress in line with its objectives. DB1 is keen to use its available cash and debt capacity (up to c €2bn) for acquisitions that meet its criteria; these are set to be both lower risk and less transformational than London Stock Exchange’s Refinitiv transaction.
• Net loss attributable to shares was €942m for Q3 19
• Deutsche booked transformation effects of €420m in Q3 19
• Total revenues were down by 15% to €5.3bn
• Additional strategy move charges of more than €1bn in Q4 19 expected
• Net loss attributable to shares was €3.5bn for Q2 19
• Deutsche booked transformation charges of €3.4bn in Q2 19
• Total revenues were down by 6% to €6.2bn
• Deutsche announced its strategy moves very late, just two weeks ago. We hope it is not too late for the bank.
• Q1 continued the weak development of last quarters. Quarterly revenues and pre-tax profit were each down by nine quarters in a row compared to the previous year’s quarter.
• Q1 19 profit is far from the humble RoTE target of above 4% for FY2019.
• DWS remains a core part of Deutsche Bank’s strategy.
• CIB target remains to be a relevant global player including in the USA and Asia.
Deutsche Bank released some preliminary figures for FY2018. Revenues were down by 4% to €25.3bn for FY2018 compared to FY2017. Risk provisions were unchanged at €525m in FY2018. Non-interest expenses declined by 5% to €23.5bn for FY2018 compared to FY2017. Pre-tax profit was up by 8% to €1.3bn for FY2018 compared FY2017. Income tax expenses were €1.8bn for FY2017 due to a one-off burden of €1.4bn by the DTA charge from the US tax reforms. Net profit reported at Deutsche was therefore €267m for FY2018 compared to a loss of €735m for FY2017. Deutsche released only net result figures without interest expenses for AT1 bonds of around €300m. Net result attributable to shares should be a slight loss of €30m for FY2018 compared to a loss of €1.05bn for FY2017. The reported EPS is a loss of €0.01 for FY2018 compared to a loss of €0.53 for FY2017.
The CET 1 capital ratio was 13.6% at the end of 2018 compared to 14.0% at the end of 2017. The leverage ratio (fully-loaded) was 4.1% at the end of 2018 compared to 3.8% at the end of 2017. Net money outflow was €25bn in 2018 (of which €23bn came from DWS and €2bn fom PCB) compared to an inflow of €20bn in 2017. The group’s headcount was down by 6% to 91,737 FTE at the end of 2018 compared to the end of 2017.
Management released a dividend proposal of €0.11 per share for FY2018 compared to no dividend for FY2017.
The bank updated its adjusted cost guidance for FY2019 from (old) €22bn to €21.8bn.
The final figures for FY2018 will be released with the annual report due on 22 March 2019.
Net income attributable to shares decreased by 67% to €211m for Q3 18 compared to Q3 17. Total revenues were down by 9% to €6.2bn in Q3 18 compared to Q3 17. Total expenses declined by 1% to €5.6bn in the same period. Risk provisions declined by 51% to €90m for Q3 18. Restructuring costs were €77m for Q3 18 compared to releases of €12m for Q3 17. Pre-tax profit was down by 46% to €506m for Q3 18 compared to Q3 17. The tax ratio was 55% for Q3 18 mainly due to changes in the recognition and measurement of deferred tax assets and non-tax deductible expenses compared to 30% in Q3 17. The RoE was 1.5% in Q3 18 compared to 3.9% in Q3 17. The CET 1 capital ratio was 14.0% as at 30 September 2018 compared to 14.0% at the end of 2017 too. The leverage ratio (fully-loaded) was 4.0% at 30 September 2018 compared to 3.8% at the end of 2017. Net money outflow was €6bn in Q3 18 compared to an inflow of €4bn in Q3 17. The group’s headcount was down by 3% to 94,717 FTE at the end of September 2018 compared to the end of 2017.
Deutsche Bank released some preliminary figures for Q2 18 on 16 July). Total revenues were flat at €6.6bn in Q2 18 compared to Q2 17. Total expenses rose by around 2% to €5.8bn in the same period. Group revenues include c.€3.5bn of revenues in the Corporate & Investment Bank (CIB), down by around 3% compared to Q2 17. Within CIB, revenues include c.€100m from a gain on an asset sale and debt valuation adjustments, reflecting a widening of Deutsche Bank’s credit spreads during the quarter. Sales & Trading revenues are expected to decline by c.15%, while Origination & Advisory revenues are expected to increase by 2% compared to Q2 17. Pre-tax profit (around €800m) was down by around 3% and net income (around €400m) decreased by around 15% for Q2 18 compared to Q2 17.
We forecast that the interest expenses for AT1 notes (CoCos) were around €300m in April 2018 compared to €288m in April 2017. Net income attributable to shares might therefore be around €100m for Q2 18 compared to a profit of €158m for Q2 17.
The CET 1 capital ratio was 13.6% as at 30 June 2018 compared to 14.0% at the end of 2017.
The full set of figures for Q2 18 will be released with the quarterly report due on 25 July 2018.
Deutsche has announced plans to significantly reshape its Equities Sales & Trading business. Overall, the bank aims to reduce headcount in this area by approximately 25%. This reduction will contribute to a decrease in leverage exposure in the Corporate & Investment Bank of over €100bn. This is approximately 10% of the €1,050bn of leverage exposure reported at the end Q1 18. In connection with the implementation of these plans, the number of full-time equivalent positions is expected to fall from just over 97,000 currently to well below 90,000. Management confirmed the adjusted cost target of €23bn for 2018 and released an adjusted cost target of €22bn for 2019. The bank confirmed the announced restructuring charges of up to €800m in 2018. The CEO said “We remain committed to our Corporate & Investment Bank and our international presence – we are unwavering in that,”.
Net income attributable to shareholders decreased by 79% to €120m for Q1 18 compared to Q1 17. Total revenues were down by 5% to €7.0bn in Q1 18 compared to Q1 17. Net interest income declined by 5% to €2.9bn, commission and fees income was down by 8% to €2.7bn and the trading result was down by 13% to €954m for Q1 18 compared to Q1 17. Risk provisions decreased by 34% to €88m in Q1 18. Total expenses rose by 2% to €6.5bn in the same period. Litigation charges were costs of €66m for Q1 18 compared to an income of €31m for Q1 17. Restructuring costs were €41m for Q1 18compared to €29m for Q1 17. Pre-tax profit declined by 51% to €432m for Q1 18 compared to Q1 17. The tax ratio was high at 72% for Q1 18 compared to 34.5% for Q1 17. The RoE was 0.8% in Q1 18 compared to 3.8% in Q1 17. The pro forma fully-loaded Basel 3 Core Tier 1 ratio was 13.4% as at 31 March 2018 compared to 14.0% at the end of 2017. The leverage ratio (fully-loaded) decreased slightly from 3.8% to 3.7% in the same period. Net money outflow was €7bn in Q1 18 compared to an inflow of €8bn in Q1 17.
Deutsche Bank also announced today actions to reshape its Corporate & Investment Bank (CIB) and additional cost-cutting measures. “By 2021, is the bank envisages a sustainable revenue share of approximately 50% from the Private & Commercial Bank and the DWS asset management business. ... Specifically, within the CIB, Deutsche Bank will focus its activities and resources on its European and multinational clients and the products which are most relevant for them, while reducing its exposure to other areas. ... The bank will scale back activities in US Rates sales and trading, shrinking the balance sheet, leverage exposure and repo financing while remaining committed to its European business. ... The Management Board has also agreed on additional cost-reduction measures.”
Deutsche Bank released some preliminary figures for FY2017. Revenues were down by 12% to €26.4bn for FY2017 compared to FY2017. Risk provisions decreased by 62% to €525m in FY2017. Non-interest expenses declined by 16% to €24.6bn for FY2017 compared to FY2016 mainly as litigation charges and impairments came down by €3.4bn to €234m for FY2017. Pre-tax profit was around €1.3bn for FY2017 compared to a loss of €810m for FY2016. The income tax expenses were €1.8bn for FY2017 compared to €546m for FY2016 due to a one-off burden of €1.4bn by the DTA charge from the US tax reforms. The net loss attributable to shares should be €800m for FY2017 compared to €1.7bn for FY2016. Deutsche released only net loss figures without interest expenses for AT1 bonds of around €288m. The pro forma fully-loaded Basel 3 Core Tier 1 ratio was 14.0% at the end of December 2017 compared to 11.8% at the end of 2016. The leverage ratio (fully-loaded) was 3.8% at the end of December 2017 compared to 3.5% at the end of 2016. Net new money inflow was €5bn at PCB and €16bn at DAM (DWS) in FY2017 compared to net money outflow of €43bn at PCB and €42bn at DAM in FY2016.
Management released no dividend proposal or statement for FY2017.
The bank updated its adjusted cost guidance for FY2018 from (old) €22bn to €23bn. It said that credit costs and litigation expense are likely to increase in 2018.
The final figures for FY2017 will be released with the annual report due on 16 March 2018.
Deutsche has issued a profit warning for FY2017 due to negative impacts from US tax reforms. The bank said that, as a result of the recent enactment of the Tax Cuts and Jobs Act (TCJA), Deutsche Bank AG expects to recognize around €1.5bn as a non-cash tax charge in the Group’s consolidated IFRS financial results for the Q4 17 from a valuation adjustment to its U.S. Deferred Tax Assets (DTA). This adjustment reflects an estimate of the impact of reducing the federal tax rate applicable to Deutsche Bank’s U.S. operations to 21% from 35% previously. As a result, Deutsche Bank expects to record a small full-year after-tax loss on an IFRS basis. The revaluation of U.S. DTA is expected to reduce the fully-loaded Common Equity Tier 1 ratio by approximately 10 bps and is not expected to impact Deutsche Bank’s ability to make scheduled payments on its Additional Tier 1 securities.
Deutsche Bank also announced that trading conditions in Q4 17 were characterized by low volatility in financial markets and low levels of client activity in key businesses. Combined Q4 17 Fixed Income (FIC) Sales & Trading, Equity Sales & Trading and Financing revenues are expected to be approximately 22% below the prior year period, excluding the impact of Debt Valuation Adjustments in both periods. Although Deutsche Bank expects to report positive IBIT for the full year, it expects to report negative IBIT for Q4 17 before taking into account combined restructuring and severance costs and litigation charges that are currently anticipated to be approximately €0.5bn in the quarter. This also reflects a loss on sale from the recently-announced disposal of the Polish Private & Commercial Bank business.
Deutsche Bank will report preliminary fourth quarter and full year results on 2 February 2018.
The focus of the Capital Markets Day of Deutsche Bank today was the Asset Management business. Deutsche announced in its strategy review in March that the flotation of a minority stake of Deutsche Asset Management (DAM) is planned to be completed within the next two years. Deutsche Bank intends to retain a majority stake in Deutsche Asset Management. DAM will have its headquarters and be listed in Germany.
DAM reported revenues of €1.9bn, a pre-tax profit of €645m, AuM of €698bn and 3,830FTE on a standalone bases for 9M 17.
DAM today announced it will introduce DWS as its new global brand. In the future, Deutsche AM will operate within a GmbH & Co. KGaA (Kommanditgesellschaft auf Aktien) legal structure. The new structure will come into effect in Q1 18.
DAM’s mid-term targets are a CIR of 65% compared to 70% for FY2016 and a dividend payout-ratio of 65% to 75%.
Net income attributable to shares increased from €256m for Q3 16 to €647m for Q3 17. Total revenues were down by 10% to €6.8bn in Q3 17 compared to Q3 16. Total expenses declined by 14% to €5.7bn in the same period. Risk provisions declined by 44% to €184m for Q3 17. Litigation charges were €140m for Q3 17 compared to €501m for Q3 16. Restructuring costs were down from €76m for Q3 16 to €7m for Q3 17. Pre-tax profit rose by 51% to €933m for Q3 17 compared to Q3 16 and was up by 14% compared to Q2 17. The tax ratio came down from 55% for Q3 16 to 30% in Q3 17. The RoE was 3.9% in Q3 17 compared to 1.6% for Q3 16. The pro forma fully-loaded Basel 3 Core Tier 1 ratio was 13.8% at the end of September 2017 due to the huge capital increase compared to 11.8% at the end of 2016. The leverage ratio (fully-loaded) was 3.8%. Net money inflow was €4bn in Q3 17 compared to an outflow of €18bn in Q3 16. The group’s headcount was down by 3% to 96,817 FTE at the end of September 2017 compared to the end of 2016.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Deutsche Bank.
We currently have 39 research reports from 4
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
With a new CEO, Amanda Blanc, Aviva’s shareholders could dream of a possible change in the group’s strategy, with a more focused insurance business. The new Chief has an opportunity to take painful decisions in a year where no one will require a high operating performance.
Companies: Aviva Plc
The Native Antigen Company (“NAC”) has been acquired by LGC for up to £18.0m – with the ongoing COVID pandemic highlighting the value of knowledge and execution in the infectious diseases space. Mercia invested in NAC via both its balance sheet and 3rd party funds. The exit represents a strong return for both sources of capital, validating complete connected capital to optimise value creation. For the balance sheet stake, the £5.2m proceeds represent a £2.5m gain on realisation (c.1.5% of our FY21e NAVps). Final Results will be announced next week, when we will review our forecasts. The shares are currently trading at a 45% discount to NAV (which is 20% cash). Today’s exit demonstrates justification for a much narrower discount, if not a premium, to conservative carrying values.
Companies: Mercia Technologies
Trading Well in Tough Market
Companies: Palace Capital
With the sale of The Native Antigen Company (NAC) for up to £18m in cash, Mercia expects to realise £5.2m (1.2p per share) for its 29.4% stake. This exit delivers another significant milestone in management’s strategy to achieve an evergreen funding model. Management has confirmed that the group is profitable on a day-to-day basis following the acquisition of the NVM VCT management contracts (NVM) in December 2019. NVM, together with additional allocations from the British Business Bank (BBB), has lifted AUM to c £800m. Management’s three-year strategy targets a sustainable, evergreen balance sheet with AUM of £1bn in FY22, with future investment commitments met through existing cash resources and realisations without the need for further recourse to the markets. Despite real progress, Mercia trades at 0.69x its September 2019 NAV, with the fee-earning funds business as further upside, not captured in an NAV-based calculation. FY20 results are due on 14 July 2020.
Hot on the heels of the Architas acquisition – announced 1st July, Liontrust has issued in line final results (£38.1m adj. PBT vs £38.3m consensus, 24p second interim dividend). An accompanying trading update also confirms that AuM bounced back in Q1 as markets recovered and net inflows were sustained at a record £971m for the quarter. The Architas acquisition – once completed later this year – stands to drive Liontrust through the £25bn AuM mark and bolster the existing multi-asset product offering and wider appeal to the current client base. As joint corporate broker, we have withdrawn forecasts pending the approval of the acquisition at the forthcoming general meeting.
Companies: Liontrust Asset Management
HgCapital Trust’s (HGT) 12-month NAV TR to end-March 2020 was a solid 13.8% despite the COVID-19 market downturn in March 2020 (ytd NAV performance since end-December 2019 was a 6.2% decline). The coverage ratio reached a historically low level (13% vs three-year average of 53%) after HGT notably increased its investment activity and commitments in Q120. However, a significant part of these new commitments will not be drawn in the near term. The board continues to review its future funding arrangements and may also opt out of a new investment without penalty across all funds. HGT’s portfolio focus is on the resilient software and technology sector and the manager expects a limited direct earnings impact on its portfolio from the COVID-19 pandemic.
Companies: Hgcapital Trust
Beijing’s forced implementation of the Hong Kong security law threatens the region’s financial hub status. This is a potential game-changer for HSBC but it does not seem to come as a surprise for the group as confirmed by the acceleration of its investments in China or its efforts to secure a leading position on the RMB.
Key takeaways from NSF’s results and presentation were: i) solid underlying 2019 with normalised operating profits up 20% and lower impairments to revenue; ii) £60m cash now ‒ April and May cash-generative; and iii) current collections 86% of pre-lockdown levels. NSF is a going concern and is considering an equity raise to help fund additional growth. Downside includes: i) statutory loss with further goodwill impairments; ii) material uncertainty arising from COVID-19 effects and so possibly its going-concern status; and iii) operating performance improvement needed for further securitisation-line drawings (waiver extended on 29 June).
Companies: Non-Standard Finance
FY20 earnings remain in line with estimates upgraded in June as the result of decisive action. Client assets are stable, acquisitions integrating well (with approval for Hurley Partners imminent) whilst net cash remains plentiful at £26m. CFO Nathan Imlach is to be succeeded by group FD Ravi Tara at the AGM, with the board bolstered elsewhere. We do not change our forecasts, pending a review at the Finals, but note the steady market trajectory (since our June revisions) could provide upside.
Companies: Mattioli Woods
Accelerating activity in to FY21
Companies: Manolete Partners
PetroTal (PTAL LN/TAL CN)C; Target price £0.45: 1Q20 results/Bretaña expected to restart in July – 1Q20 financials are in line with expectations and 1Q20 production had been reported previously. At the end of 1Q20, current trade and other payables had been reduced to ~US$45 mm compared to ~US$55 mm at YE19. Most importantly. PetroTal continues to expect the Bretaña field to be re-opened this month. The contingent liability with Petroperu is estimated at US$25 mm at the current oil price and the company has entered into a financial swap for 0.46 mmbbl of oil with an ICE Brent reference price of US $40.58/bbl to cover the upcoming sale by Petroperu at the Bayovar port. This is a recovery story that we continue to like. It offers a combination of value, production and cash flow growth and reserves upside. We anticipate that the imminent reopening of the field with be an important catalyst to the share price.
i3 Energy (I3E LN): Reveals takeover target in Canada | Maha Energy (MAHA-A SS): Production update | Aker BB (AKERBP NO): 2Q20 update in Norway | Energy (RRE LN): Recommended offer by Viaro Energy | Spirit Energy: Dry hole in Norway | Enwell Energy (ENW LN): Ukraine update | JKX Oil & Gas (JKX LN): 2Q20 update in Ukraine and Russia | Pharos Energy (PHAR LN): Operating update in Egypt and Vietnam | Sound Energy (SOU LN)C: Terms of Moroccan licence renegotiated | Tethys Oil (TETY SS): June production in Oman | Victoria Oil & Gas (VOG LN): Gas sales contract with ENEO in Cameroon terminated
EVENTS TO WATCH NEXT WEEK
14/07/2020: Aker BP (AKERBP NO) – 2Q20 results
15/07/2020: Premier Oil (PMO LN) – 1H20 update
13-17/07/2020: GeoPark (GPRK US) – 2Q20 update
Companies: I3E MAHAA JKX PHAR EQNR AKERBP ENI HUR PTAL REP RRE SOU TPL VOG OMV
Numis’ update for Q320 was positive, reflecting both the need for equity funding in the market and the strength of the group’s franchise as well as its ability to deal with current operating constraints. Subject to the market background in its final quarter, we now expect Numis to achieve a full-year result in line with or ahead of the high end of our previous scenario range.
Companies: Numis Corporation
With care home COVID-19 infection rates continuing to decline, and continuing full rent collection, Impact has reaffirmed its intention to pay its Q220 DPS in line with expectations. Across the sector, the pandemic has created operational challenges for care home operators, including Impact’s tenants, but it has also highlighted the essential service that the sector provides. This may have the positive effect of permanently improving resident funding and support investment to meet the increasing care needs of a growing elderly population.
Companies: Impact Healthcare Reit
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
Companies: AGY ARBB ARIX DNL GDR NSF PCA PIN PHNX PHP RE/ RECI STX SCE SIXH TRX SHED VTA