Deutsche Bank is doubling defense investment as a broader European impulse to unlock new capital in the region.
In statements to Annette Weisbach of CNBC at the Tag Der Industrie Conference in Berlin on Monday, the Deutsche Bank CEO, Christian Sewing, said the German lender has increased his exposure to the defense industry with the melody of “billions of two digits.”
“Actually, we have evaluated not only the appetite of our portfolio, but also the resources we contribute to advise our clients,” he said.
Speaking more broad about the industry, Sewing said that “we have been clearly, in particular on the European side, having invested”, emphasizing that “defense is one of the central themes for a country, [and] I think we are always underestimating what is the positive impact of defense spending. “
Their comments arrive at the week of a key NATO summit in which members seek to increase their 5%defense contribution spending target. According to reports, NATO members agreed this walk in principle before an annual summit this week, with Spain emerging as an atypical.
The president of the United States, Donald Trump, began floating the idea in January, since he asked other alliance members to assume more responsibility for their own security.
Since then, the EU has promised to mobilize 800 billion euros ($ 928 billion) to help member countries “massively boost their defense expense”, while the United Kingdom has also promised to increase its own expenses, and the German Parliament approved a historical reform that raided the way for a greater investment in national security.
Finance the unit
Sewing said Deutsche Bank must now work with public institutions to see how to take advantage of government funds.
“At the end of the day, money must go to the average limit and supplier companies,” he said. “And here we need to work intelligently with institutions such as [development bank] Kfw or [the European Investment Bank]”
The sewing said that if the EU “finally works[s] In “The Capital Markets Union, its plan to create a single market for capital to allow investments and savings to flow freely through the block, Deutsche Bank and its partners will be” well prepared to finance “defense expenses.
The head of the German lender agreed that the mood in Europe had catalyzed the impulse between the new defense companies in the region, noting that the EU determination of increasing defense expense could act as a stimulus for innovation.
He argued that the ingenuity that supports the California Silicon Valley is in part the result of the long will of the United States to invest in defense.
European defense actions have been in a bull race for most of the year in the midst of the broader expenses campaign, and many market observers see more the other way around.
The Defense Index and the Defense Index of Stoxx Europe has increased by almost 50% of the year, and some companies in the sector almost double their value.
As of Monday’s agreement, the German manufacturer of Renk tanks has seen that their shares increase 259% since the beginning of the year. During that time, German defense giant RheinmetallThe actions of ‘S jumped 183%, while the Hensoldt of Germany appeared 168%.
In a Tuesday note, Deutsche Bank’s strategists increased their target price in Airbusgiving the action a “purchase” qualification and promoting the 5% objective of NATO as a measure that would soon be “benefiting defense companies.”
“The United States is changing its approach to the Indo-Pacific region, creating a capacity gap in Europe for transport, tank aircraft and helicopters, which Airbus Defense and Space (ADS) are well positioned to fill,” they said. “ADS’s growth and profitability is expected to materialize after 2018, precisely when the Airbus commercial can reach a plateau. In addition, Airbus remains affordable compared to commercial and defense partners.”
Meanwhile, in a grade of June 10, the lender analysts said that Europe has “a rare opportunity to capitalize on the evolving global panorama.”
“With the inflation pressures that decrease and a new wave of defense and industrial stimulus gaining traction, the economic impulse gradually returns,” they said.
At the European Defense and Security Summit in Brussels earlier this month, the BEI announced that it would lend Deutsche Bank 500 million euros to facilitate the provision of financing for small and medium enterprises that work in the EU Safety and Defense Supply Chain. The funds will also be accessible to military and police infrastructure, such as training facilities.
