Deutsche Bank AG (DB)

This could be a Buy based on his view of undervalued European banks. You would probably see a couple of good years going forward in the European stock market. However there is still a bit of hair on this. It's cheap, trading at about .4X BV. There are other banks or service companies you could buy that doesn't have as much hair. He would go with names like Credit Suisse that trades at about .8X BV or UniCredit, an Italian bank trading at .75X BV.

They raised capital and did not put it to good use. It is not going to earn a dime, but will prop up the balance sheet. He focuses on the balance sheet and this is an example of some of those risks that show up in them.

There was lots of press about them going to go under. While the global economy is going well, even if there is stuff hidden underneath the carpets, it is probably not going to come out. If you believe the global economy is doing well, then you would expect this company to come out and do okay. Chart shows the stock is trading in a channel and is currently at the bottom of the channel, which is good right now.

Merkel won the election, which was holding things back. He thinks the other European banks will go the same way. They will raise rates and reduce regulation, which are good for banks. This is a core bank in Europe that is ready to go.

This bank is now properly capitalized. They’ve been through the worst and are selling at about a 50% discount to tangible BV. They are not the best in the business, but they do deserve to sell for a much higher price than what they are trading at. Earnings have stabilized and they are earning money. One of the cheapest stocks he owns.

This was one of his worst performing stocks a couple of years ago, but has been one of his best over the last 12 months. They decided to do an $8 billion-euro capital raise earlier this year, which he participated in. With that $8 billion euros, their ratios are way above where they have to be. They are now well capitalized and are in the midst of huge cost cutting. Selling for about half its tangible BV, and is compellingly cheap. Rising interest rates are a massive boost for this bank. They have great market shares in a lot of businesses. They are now once again well capitalized, and he is comfortable holding it. Doesn’t expect earnings to take off in the next couple of years. Hopes management does some of the things it says it is going to do and gets its businesses back to earning reasonable margins.

He likes it even more now that it has slid down. The European banks are where the American banks were in 2009. Rates will be at their back, they will be consolidated and will have sectors they want to be in and so they will do well. (Analysts’ target: $13.13).

(Market Call Minute) A low quality bank that will continue to have write downs. They had to issue more shares to raise capital.

He likes certain banks in Europe, but this would not be one of his favourites. They don’t have a strong retail franchise that others have. Heavily weighted to the investment banking side, which requires a lot of capital, especially in fixed income. He would prefer something that has good growth potential. There are other places to put your money.

Europe is looking at raising interest rates. This bank has operations in different parts of the world. It wouldn’t be his preferred one in Europe, but thinks there is more upside for the European financials. The concept of buying a European bank is a good one.

He likes the European banking sector. This bank has been beaten with a stick. It was a big stock before the downturn. They had lots of problems, and have spent the last couple of years cleaning up. The German government did not let this bank fail in 2008-2009 when it was wobbling like a top, and they are not going to let it fail now. Dividend yield of 1.2%. (Analysts’ price target is €16.40.)

The biggest bank in Germany, so there is no way this would ever be put into receivership. The government would step in. Despite that, it is a very risky bank. They have multiples and multiples of their BV in all kinds of strange things. It’s like J.P. Morgan (JPM-N) on steroids. They are a massive player in the capital markets and the banking markets globally. He would prefer using a broader basket of banks through an ETF like iShares MSCI Europe Financial (EUFN-Q).

The Continental European banks are about 18 months to 2 years behind the US in terms of rate rises. This bank is not going to face rising rates anytime soon. They recently recapped the capital rights that affects the balance sheet, but it has been a bit of a disaster. There were management issues. He would probably pass on this one.

A play on Europe. They have just had a writes issue. Have refinanced and recapitalized the company and the business. They are an impenetrable bank in Europe. If you believe Europe is starting its road to recovery, banks are going to do the same that they did in the US. He has a covered call on this.

With rates in negative territory it has been a challenging environment for any European financial institution. Capital Delinquency is a bit challenging.