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Deutsche Bank (NYSE:DB) has maintained its top position in currency trading this year, as the firm competes globally with other big-name banks like Credit Suisse (NYSE:CS), UBS (NYSE:UBS), JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS).

Deutsche Bank remains the largest currency trading bank in the world, although its market share dropped by 2.5% this year, the biggest drop for any bank in the top-20. Competition in the $4 trillion a day currency trading business is intensifying, with smaller banks scaling up their operations to compete with the leading bulge bracket banks. The combined market share of the top three has dropped from 46% in 2009 to 37% this year. [1]

The sales & trading division of Deutsche Bank constitutes around 28% of our $60.82 price estimate for the company’s stock, which is roughly in line with market price.

Chart created using Trefis' app

Yield on Trading Assets for Bonds, Currencies & Commodities Could Drop

Deutsche Bank’s yield on trading assets for bonds currencies & commodities took a sharp fall in 2008, before recovering in 2009. However, 2010 was another volatile year for trading and Deutsche’s yield dropped by around 2%. During our forecast period, with the global macro economic environment improving, we expect the yield to remain relatively stable at current levels of about 4%.

However, if the bank continues to lose market share in currency trading, which is considered to be its forte, there could be downside to the company’s stock value. If the yield on trading assets for bonds, currencies and commodities falls to around 2% during our forecast period, for example, it would imply about 7% downside to our $60.82 stock price estimate.

Notes:

  1. Deutsche Bank maintains top ranking in currencies

Disclosure: No positions

Source: Deutsche Bank Still Largest Currency Trader Despite Drop in Market Share