Deutsche Bank: Improvement in earnings mix and profitability not linear - Valuation remains too cheap

Research evidence excerpt

Deutsche Bank: Improvement in earnings mix and profitability not linear - Valuation remains too cheap

Figure 2: Divisional results - CB, PB, IB all showed better than expected topline

andSource:operatingCompany dataprofitfor actualperformanceDivisionalfigures and consensus estimates, UBS estimates

The Investment Bank delivered the largest divisional beat, with operating income 33%

ahead of consensus, revenues 10% ahead, FIC 9% better and IBCM 14% better.

Management described the FIC performance as a record second quarter, broad-based

across rates and credit, and suggested Deutsche Bank likely gained market share

without materially increasing RWA deployment. The tone on IBCM also improved, with

management pointing to strong growth in equity origination and advisory and stating

that second-half pipeline visibility supports further significant y/y revenue growth. That

said, management was appropriately measured on extrapolating FIC strength: while July

had started constructively and client risk-management needs remain supportive, they

acknowledged seasonality and the difficulty for European FIC franchises to compete

with US peers benefiting from regulatory relief.

Guidance was reiterated but with a positive bias. Deutsche Bank remains on track for

around €33bn of FY26 revenues, while banking book NII is now expected to slightly

exceed the prior guidance of around €14bn. Management also indicated that, given

first-half performance and the range of potential outcomes, revenues could be

comfortably above €33bn depending partly on the evolution of Corporate & Other,

where first-half outperformance may revert in H2. Cost guidance remains slightly above

€21bn, and management was firm that it sees no reason to exceed that level, with