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Analyst Blog

On Aug 18, 2014, we issued an updated research report on Deutsche Bank AG (DB - Analyst Report). The company recently reported dismal second-quarter 2014 results. With continuing uncertainty around emerging markets, the company recorded a deteriorating top line. Yet, prudent expense management led to a fall in expenses.

Deutsche Bank posted net income of €238 million ($326.4 million) in the second quarter of 2014, down from €335 million ($437.4 million) in the prior-year quarter. Furthermore, the bank posted net revenue of €7.9 billion ($10.8 billion) in the reported quarter, down 3.7% year over year.

Though organic growth remained a key strength at Deutsche Bank, as reflected by its revenue growth story in the past with a CAGR of 19.9% over the five years (2008–2012), revenues started dropping since 2013, primarily due to a downturn in corporate banking and securities business. Continuation of such a trend will become a hindrance for bottom-line growth.

Due to the nature of its business, Deutsche Bank is involved in litigation, arbitration and regulatory proceedings in Germany and a number of jurisdictions outside Germany. Such matters are subject to many uncertainties. Though the company has resolved a number of important legal matters and made progress on others, we expect the litigation environment to continue to be challenging.

Following second-quarter 2014 results, the Zacks Consensus Estimate decreased 2.6% to $3.75 for 2014, over the last 30 days, while the Zacks Consensus Estimate declined around 1% to $4.68 for 2015. Hence, Deutsche Bank currently carries a Zacks Rank #4 (Sell).

Key Picks from the Sector

Some better-ranked foreign stocks worth considering include Shinhan Financial Group Company Ltd (SHG) with a Zacks Rank #1 (Strong Buy), while Itau Unibanco Holding S.A. (ITUB - Analyst Report) and Banco Santander, S.A. (SAN - Snapshot Report) carry a Zacks Rank #2 (Buy).

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