Musings on Markets · 2016-10-06 · 3528d

Deutsche Bank's Financial Crisis: Valuation Analysis and Path to Recovery

This valuation analysis examines Deutsche Bank's deteriorating financial performance following a $14 billion DOJ fine for mortgage-backed securities violations. The article projects a rocky recovery path with continued losses through 2018 before achieving profitability, assuming the bank reaches a 5.85% return on equity by year 5 and eventually recovers to its 9.44% cost of equity by year 10.

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Metrics in this report

Cost of Equity

9.44%%

estimated

Deutsche Bank

Cumulative Losses

$16 billionUSD

total

Deutsche Bank 2014-2015

DOJ Fine

$14 billionUSD

asserted

Deutsche Bank mortgage-backed securities violations

DOJ Fine Expected Payment

$6 billionUSD

estimated by bank

Deutsche Bank negotiated settlement expectation

Global Bank Tier 1 Capital Ratio

13.74%%

average

All publicly traded banks globally

Market Capitalization

$17.99 billionUSD

market cap

Deutsche Bank at October 4, 2016

Stock Price

$13.33USD per share

closing price

Deutsche Bank on October 4, 2016

Stock Price Decline from 2012

50%%

percentage decline

Deutsche Bank 2012-October 2016

Stock Price Decline from Pre-2008

80%%

percentage decline

Deutsche Bank pre-2008 to October 2016

Target Return on Equity Year 5

5.85%%

25th percentile

Deutsche Bank projected

Tier 1 Capital Ratio

14.65%%

actual

Deutsche Bank end of 2015

Tier 1 Capital Ratio (Post-Fine)

12.41%%

adjusted

Deutsche Bank after estimated $10 billion fine impact