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What to Expect From Deutsche Bank (DB) This Earnings Season?

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Deutsche Bank AG (DB - Free Report) is scheduled to report first-quarter 2018 results on Apr 26.

In the last reported quarter, the German banking giant reported a net loss, primarily due to a one-time charge related to the tax reform. Also, lower revenues due to trading slump remained an undermining factor. However, cost management and reduction in provisions were the positives.

In the first quarter, the bank resolved a lawsuit with the regulator related to the LIBOR manipulation and agreed to pay $240 million in penalties. This will have an adverse impact on the bank’s earnings.

However, with volatility back in the market after three consecutive quarters of witnessing muted activities, the bank’s trading revenues are expected to rise. Notably, the Zacks Consensus Estimate for earnings of $1.21 show a significant increase on a year-over-year basis.

During the quarter, Christian Sewing replaced John Cryan as the CEO of the bank. So far, the Germany-based lender had been trying to turnaround the bank through cost-saving measures and focus on investment banking amid unfavorable trading environment and prevalent legal matters. However, the new CEO is all set to revamp the bank through some “tough decisions”.

Factors to Influence Q1 Results

Rise in Trading Activities: During the first quarter, trading environment was impressive as markets experienced increased volatility due to several factors. Moreover, trading in equities is expected to witness an uptrend due to increased client activities. Thus, revenues are likely to get support from higher related fees.

Revenue Growth Might Remain Muted: Despite support from trading revenues, the bank’s revenues are expected to remain muted as it expects a €450 million hit on account of foreign exchange headwinds and higher funding costs in the quarter.

Rise in Loan Demand to Support Interest Income: While a low interest rate environment across several major economies continue hampering interest income growth, increase in loan demand is likely to offset it to some extent.

Legal Issues: Deutsche Bank’s struggle with legal matters continues to impact its bottom line.

Deutsche Bank Aktiengesellschaft Price

Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other foreign banks, Barclays (BCS - Free Report) , Itau Unibanco Holding S.A. (ITUB - Free Report) and The Royal Bank of Scotland Group plc are scheduled to report results on Apr 26, May 2 and Apr 27, respectively.

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Itau Unibanco Holding S.A. (ITUB) - free report >>

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