Deutsche Bank is doubling its defensive investments as a broader European drive to unlock fresh capital in the region.
Speaking to CNBC’s Annette Weisbach at the TAG Der Industrie Conference in Berlin on Monday, Deutsche Bank CEO Christian Sewing said the German lender had increased its defense industry exposure to “double-digit billion” euro songs.
“We actually expanded the size of the resources we bring to advising our clients, not just our portfolio’s appetite,” he said.
Speaking more broadly about the industry, Sewing said that “we are clearly investing in the European side, especially in the European side.” [and] I think we are constantly underestimating what the positive impact of defence spending is. ”
His comments come in the week of the important NATO summit, where members are seeking to agree to potentially increase their defensive contribution spending target to 5%. NATO members reportedly agreed to the hike as a rule ahead of this week’s annual summit, with Spain emerging as an outlier.
US President Donald Trump began to come up with ideas in January as he called on fellow members of the alliance to take more responsibility for their own security.
Since then, the EU has pledged to mobilise 800 billion euros ($928 billion) to “substantially increase defence spending,” but the UK has pledged its own spending, and German parliament has passed historic reforms that paved the way for national security investments.
Funding for the drive
Sewing said Deutsche Bank must now work with public agencies to find out how it can leverage government funds.
“At the end of the day, money needs to go to midcap and supplier companies,” he said. “And here we need to work smarter with institutions like: [development bank] KFW or [the European Investment Bank]. ”
Sewing said if the EU finally works[s] “The Capital Markets Union – A plan to establish a single market of capital to allow investments and savings to flow freely through the block – Deutsche Bank and its partners will prepare to “enough fund” defence spending.
The German lender’s chief agreed that the European mood had inspired momentum among local defence startups.
He argued that the ingenuity behind California’s Silicon Valley was part of the US long-standing willingness to invest in defense.
European defence stocks have been bullrunning for most of their broader spending drives, with many market watchers looking even further.
The Stoxx Europe Aerospace and Defense Index has grown nearly 50% since the start of the year, with some companies in the sector almost doubled in value.
As of Monday’s settlement, German tank parts maker Renk had surged in stocks by 259% since the start of the year. Meanwhile, German defence giants rheinmetallGermany’s Hensold won 168% and its stock rose 183%.
In a memo on Tuesday, Deutsche Bank strategists raised their target price Airbusgives stocks a “buy” rating and immediately promotes 5% NATO targets as a move that “profits defence companies.”
“The US has shifted its focus to the Indo-Pacific region, creating European capacity gaps in transport, tanker aircraft and helicopters. Airbus defense and space (ADS) are good to meet,” they said. “The growth and profitability of ADS is expected to be realized after 2028 if Airbus Commercials could reach Plateau. Additionally, Airbus remains affordable compared to both commercial and defensive peers.”
Meanwhile, in a note on June 10th, lender analysts said Europe has “a rare opportunity to take advantage of the evolving global landscape.”
“As the pressures of inflation ease and the momentum of defense and industrial stimuli increase, economic momentum is slowly coming back,” they said.
At the European Defense and Security Summit in Brussels earlier this month, the EIB announced it would lend Deutsche Bank 500 million euros to promote funding for small and medium-sized businesses working in the EU’s security and defense supply chain. Funds are also accessible for military and police infrastructure, such as training facilities.
