Deutsche Bank: A Greek Tragedy at a German Institution?

Deutsche Bank, in addition to having a long and storied history, is a German bank, and the Germans, with their reputation for precision, are viewed as good bankers. Thus, Deutsche's troubles not only over the last few weeks but stretching across the last few years have been unsettling to investors. With the stock down 80% (as of October 4, 2016), it looks like a contrarian bet, but I value Deutsche reflecting the new reality that faces them (big losses, capital shortfalls, possibility of a bailout) and make my investment judgment (Sorry, but you have to watch the video to the end to get that!)
Slides: www.stern.nyu.edu/~adamodar/pd...
Valuation: www.stern.nyu.edu/~adamodar/pc...
Blog Post: aswathdamodaran.blogspot.com/2...

[@AswathDamodaranonValuation]

It costs me nothing to share what I know and I gain from the sharing. So, no need to do anything for me. Just pass on the learning!

[@bettyboop200]

i appreciate this analysis, but it misses inmho a factor, being current management. it is being run by lawyers(the chief risk guy is not a numbers guy, and an it person, (the coo) and a few others with unsophisticated experience). this is smth. anshu whatwashisnameagain could pull of, but what sits there now: no.

[@amartin4423]

Dr. Damodaran, please keep the videos coming! I can't get enough of listening to you.

[@sgurung80]

Aswath Damodara

[@bensonhuo]

Aswath Damodaran good job on DB.your investment return is almost a double as of today. Plus trump may untie banking regulations. It is a good sign for the bank. Cheer

[@AK47198]

Aswath Damodaran : Would be happy to get another valuation on the Bank

[@AswathDamodaranonValuation]

I took $10 billion out of the initial book equity and regulatory capital for the expected fine.

[@octavicastellspera5282]

Thank's for sharing. Extremely interesting valuation approach

[@bolsaparaprincipiantes]

Thank you, Aswath!

[@arvindm07]

Another great analysis Mr. professor. As always I have thoroughly enjoyed it. I love to value companies.
I would love to see your analysis of Genworth Financial. I have tried to value it myself, and would like to see how you would approach valuing an insurance company. Thank you.

[@antoniredziniak7602]

Great Video. Thank You for sharing Aswath.

[@Vezarici]

Hello Aswath Damodaran,
Great analysis from you as always. Could you please share with us how have you estimated the risk adjusted assets for the base year ?
Thanks

[@RamA-tb7fo]

Sir, what is your take on derivatives that Deutsche bank carries in its books currently contributing to a default. It looks like size of those derivatives are huge probably 4 times or more than the capital base.
Also is it ok to just assume 10 % probability of a failure when derivatives are this huge.

[@klaudiu9128]

thanks for the videos Aswath!!

[@swapnil.7988]

big fan of yours sir...

[@CheeseMan1391]

Thanks for the video Professor! These sessions are awesome, and I think CNBC should offer you your own special segment. You'd be 10x better than Cramer.
If you simply deferred those ROE assumptions a longer way out but still came to the conclusion DB managed to return 9.44% ROE's in Y10 and TY, would you get a similar evaluation?
Also, how did you come up with the probability of failure?

[@bahaa9552]

Thank you. You share the knowledge that others try to keep a secret. Could you please share a new analysis of Deutsche Bank ? With the recent declines in its stock price and the threats it had .

[@vishantshah4878]

Great video professor. Just want to understand, if I want to factor in the collapse of eurozone and some disastrous transactions on derivative desk, will the share still be undervalued? Further, can you pl share the cost of equity, return on equity data of global banks. I am from india and I feel very few PSU banks can make through due to recent asset quality issues.

[@alexandergunnar3612]

After watching again, I was wondering why not use Risk@ or Cristal Ball instead of attaching a 10% probability of default?

[@keng-honggoh1391]

Thanks for sharing this prof. Did you missed out accounting for the fines that DB has to pay, or it has been incorporated into the initial losses in your assumptions? My reading based on news is that there could be more fines to hit the company. Also the initial-years negative cash flows were discounted with cost of equity, whereas in reality if they go out now to raise Tier 1 capital, chances are they have to provide investors with higher returns (think of the convertible preferred shares deals Warren Buffett got during the GFC)?
I can understand your approach of attaching 90% probability of turnaround + 10% probability of going bust. However, I won't be as comfortable of taking action based on that. My gut feel tells me DB is probably going to get stuck as a living dead company for many years, much like those lost-decade Japanese companies, given its fundamentally flawed business model. As you pointed out, even prior to 2005 they weren't making such good returns (looks like below cost of equity).

[@ndon85]

dear professor, considering the stock price is way below your evaluation in 2016, do you still feel it is going to come back or, maybe due to the course of events, a re-evaluation would actually tell a different story? Thank you

[@mosheikss]

aswath u are a gangsta

[@henner247]

One of the best that turned out to be wrong... Excellent video still

[@keshavbharti1201]

Thank You, Professor. Listening to this at 3amIST. Thanks for turning a sleepless night into absolute knowledge fest!

[@keshavbharti1201]

Just out of curiosity - did you exit?

[@arvindm07]

Hi Aswath, I was asking to value Genworth Financial a couple of weeks ago.
Today the company is being bought by a chinese firm for just 4% premium from friday's stock price.

[@alexandergunnar3612]

Only this to say: You are amazing! =D

[@amosandrecantini3453]

I bought an italian car cause i hadn't enough money for an Audi...

[@mafaldaseguro2719]

in fact the first thing i tink of when i ear the word germany is beer

[@rishabhsurana332]

the 200th like :)