Deutsche Bank: Asset Quality Guidance Positive

Deutsche Bank conf call feedback: positive loan loss guidance (driving equity price) partially offset, for credit investors, by equity payout rhetoric. DB spreads are little changed today and we sense outperformance will take the realisation of the 2H24 improvements mgmt has indicated.

• Loan loss-based upgrades: much as mgmt had few specific positive NPL trends to point to, it stuck rigidly to its guidance of the “upper end” of the range of 25-30bp of loan losses for FY24. So, after 37bp in 1Q24, and consensus calling for a similar run-rate all year, it would seem there’s upgrade potential here. We feel this is pushing the equity today.
  • Specifically, mgmt alluded to a collections backlog issue in the retail business, which should clear soon, alongside a gradual improvement in CRE over the year. These are set to drive an improvement in loss charges in the second half.
• Capital outlook: mgmt has a clear commitment to equity payouts (EUR8bn over 2022-26) and a 2Q24 buyback has already commenced (of EUR675m). Beyond this, mgmt did indicate its already in talks with regulators over a renewed authorisation for the second half of the year.