UBS Misses On Costs, Deutsche Bank Beats On FICC, Non-Core

By Mani
Updated on

Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB)’s CIB was strong with PBT of €885 million, 38% ahead of consensus, while UBS AG (NYSE:UBS)’s Wealth Management revenues dropped 3% below consensus, notes Jefferies analyst.

Omar Fall for Jefferies in the research reports dated July 29, 2014 notes UBS’ CET1 capital was in line with expectations while Deutsche’s was higher than consensus.

Buy rating on Deutsche

The Jefferies analyst notes Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB)’s 2Q2014 CIB was strong with PBT of €885 million, which was 17% above 2Q2013. The bank’s PBT from CIB is 38% above consensus thanks to FICC which was flat YoY, stronger than anticipated in the light of the bank’s bias to the rates business (see Deutsche Bank Trading Lags But FICC Could Be Entering Sweet Spot)

Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB)’s CB&S revenues in 2Q2014 were €3.5 billion, showing a drop of 1% from the same period last year. The drop was primarily attributable to an 11% decline in Equity Sales & Trading revenues, being largely offset by a 10% growth in Origination & Advisory revenues.

The Jefferies analyst notes the strong performance in FICC was offset by the equities revenues, primarily due to derivatives, which doesn’t bode well for BNP/SG.

Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB)’s Non-Core Operations Unit(NCOU) loss before income tax was €580 million, as compared to €672 million in the same period last year, since the current quarter included a loss of €314 million in revenues from debt refinancing restructuring of Maher Terminals. The Jefferies analyst notes non-core PBT was below the consensus €750 million, with the bank achieving €8 billion worth of NCOU deleveraging in the quarter which was slower than the analyst would have anticipated.

Omar Fall notes Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB)’s CET1 of 11.5% was higher than consensus of 11.4% despite RWAs being up 7% thanks to higher operational risk. The analyst assigned “buy” rating on Deutsche with a target price of €45.10.

UBS gets Hold rating

The Jefferies analyst notes UBS AG (NYSE:UBS)’ IBD revenue increased 28% to CHF 986 million from CHF 770 million in the same period previous year, thanks to strong performance in equity capital markets. Though UBS’s FICC was 11% ahead, its Equities missed by 10%.Moreover UBS’ core FX business was weak, while rates and credit were resilient.

Omar Fall notes UBS AG (NYSE:UBS) delivered adjusted results slightly below consensus as its IB revenues were strong, offset by soft WM/PB trends. The analyst points out that UBS’ CET1 capital at 13.5% was in line with expectations, with RWA flat QoQ at CHF 227 billion.

The Jefferies analyst assigned “Hold” rating on UBS with a price target of CHF19.70.

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