On Tuesday, Deutsche Bank (ETR:DBKGn)'s stock (NYSE:DB) received an upgrade from Barclays (LON:BARC), moving from an Equalweight to an Overweight rating. The shift in rating is attributed to a positive outlook based on several key factors, including supportive fundamentals and a potential for significant earnings per share growth.
Barclays highlighted that their earnings per share estimates for 2025 to 2026 are 15-21% above the consensus, suggesting a robust financial performance ahead for Deutsche Bank. This optimistic forecast is further supported by the expectation of a capital return greater than 30% paid between 2025 and 2027.
The bank's valuation metrics also played a role in the upgraded rating, with Barclays pointing out the high multiple re-rating potential for Deutsche Bank. Currently, the bank's price to earnings ratio is below 5x, and its price to tangible book value is under 0.5x for the year 2025, compared to a circa 10% return on tangible equity.
Barclays' analysis indicates that these factors combine to present a compelling case for the stock's future performance. The firm's positive stance reflects the expectation that Deutsche Bank will not only deliver strong returns but also experience a reevaluation of its market value.
In other recent news, Deutsche Bank AG (NYSE:DB) has made significant progress in resolving ongoing litigation issues. The bank announced settlements with the majority of plaintiffs involved in the Postbank acquisition dispute, covering nearly 60% of the total claims. The settlements, based on a compensation of 31 euros per share, are anticipated to have a positive financial impact on the bank, with an expected effect of approximately 430 million euros on its pre-tax profit for the third quarter.
The bank also settled a $30 million civil lawsuit with former trader Gavin Black. These recent developments follow Deutsche Bank's strong operational performance in the second quarter of 2024, where it remained on track to meet its annual revenue target of €30 billion.
In addition, Deutsche Bank indicated that it might reconsider a previously canceled share buyback and plans to engage in discussions with regulators about its improved capital plan and distribution strategy.
InvestingPro Insights
In light of Barclays' optimistic outlook on Deutsche Bank (NYSE:DB), real-time data from InvestingPro provides additional insights into the company's financial health and market performance. With a market capitalization of $31.52 billion and an attractive price-to-earnings (P/E) ratio of 8.7, Deutsche Bank appears to be trading at a valuation that could interest value investors. Notably, the bank's price-to-book value as of the last twelve months leading into Q2 2024 stands at a low 0.39, underscoring Barclays' point on the bank's high multiple re-rating potential.
InvestingPro Tips reveal that Deutsche Bank has a pattern of rewarding its shareholders, having raised its dividend for three consecutive years. The dividend growth over the last twelve months into Q2 2024 was 52.07%, with a dividend yield of 2.23%, which could be appealing for income-focused investors. Moreover, analysts predict the company will be profitable this year, aligning with Barclays' forecast for strong earnings per share growth.
For those considering an investment in Deutsche Bank, there are additional InvestingPro Tips available that can provide deeper insights into the company's performance and outlook. In total, there are 11 tips listed on InvestingPro, which can be accessed to help inform investment decisions.
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