Sell Deutsche Bank and Buy Natixis, Credit Suisse Says

Deutsche Bank (DB) is set to remain the worst performer in the European financial sector, according to analysts at Credit Suisse. But French bank Natixis  (NTXFF) claimed the top spot as Europe's most likely outperformer in the analysts' monthly investment tip sheet.

Both stocks are down for the year to date after a plethora of concerns over global political, economic and financial stability drove investors out of the banking sector throughout the first half.

But they have both also benefited from the recent election of Donald Trump, although Deutsche Bank more so, given that the President-elect is seen as likely to be a lighter touch when it comes to most forms of regulation.

However, the banks' fortunes could be about to diverge, with Natixis likely to benefit more from a Trump presidency over the medium term.

Deutsche Bank, regardless of Trump's tone on the subject of regulation, undoubtedly faces a substantial fine from the Department of Justice over the sale of mortgage-backed securities during the financial crisis.

And capital concerns and threadbare returns to investors are likely to remain a weight around the ankles of the German lender, according to Credit Suisse.

Jan Wolter, an analyst with the Swiss bank, predicted Deutsche could look to raise €6 billion to €8 billion ($6.3 billion and $8.5 billion) quickly to raise its common equity Tier One capital ratio to about 13%, assuming a DoJ fine of about $5 billion.

Wolter has forecast that a €7 billion capital raising would reduce tangible book value per share for Deutsche to €30.

He concludes that following a capital raising, Deutsche stock would hug the €13 threshold, which is about 0.4 times the forecast book value and in line with current multiples for the more risky banks.

Deutsche stock was down 0.8% at €14.80  by midday in London on Thursday. The bank has gained 17% since the U.S. election but the stock is still down by more than 30% for the year to date.

The grass is greener elsewhere on the continent, however, with French bank Natixis likely to be among the greatest beneficiaries of a stronger dollar.

The Paris-based firm gets more than 30% of its revenue come from the U.S. and an estimated 40% of earnings.

It also benefits from having 65% of its business focused on areas that are less vulnerable to the ultra-low interest rates that have driven many other stocks into the ground during recent quarters.

Wolter said: "We think consensus estimates were cut a little far in 1H16," before forecasting that the stock will offer investors a 7.8% dividend yield for 2016.

Natixis stock was down 0.4%, changing hands at €4.70. It is down by close to 10% so far this year.

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