We believe German banks show
promise as investments because of
their exposure to Germany’s economy
􀀗 Once the market differentiates among
the banks’ subprime exposure, shareprice
recovery could accelerate
􀀗 We initiate coverage of Aareal Bank and
Commerzbank with Overweight ratings,
Hypo Real Estate with Overweight (V),
and Deutsche Postbank with Neutral.
We reiterate Neutral on Deutsche Bank
Initiating coverage of German banks
Although we are sceptical about the retail banking outlook,
we like the securities-related business models and SME and
commercial real-estate lending of German banks. It has been
a long time since the German economy was the locomotive
and not the laggard in Europe. Banks should benefit.
Subprime exposure kept to a minimum
The impact of the subprime crisis, except for IKB, is less severe
than most market participants think, in our view. All five banks
mentioned in this report have negligible subprime exposure and
have done a much better job of assessing the risks than IKB.
But we do expect more write-downs in Q4 reporting.
Valuation attractive relative to sector
At current PE and PBV, three of the four banks whose
coverage we are initiating trade at a discount to the European
bank sector. Commerzbank is our top pick on fundamentals.
Postbank looks a likely M&A target for 2008, which
presents an upside risk to our EUR65 target price and
Neutral rating for Deutsche Postbank; we provide a scenario
analysis of possible takeout prices.

目录

Investment summary 3
German banks: The best
banking play for now? 4
Company profiles 13
Aareal Bank 14
Commerzbank 23
Deutsche Bank 33
Deutsche Postbank 37
Hypo Real Estate Group 46
Disclosure appendix 58
Disclaimer 63