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Bear of the Day: Deutsche Bank (DB)

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Headquartered in Frankfurt, Germany, Deutsche Bank (DB)is the largest bank in Germany and one of the largest financial institutions in Europe and the world, with assets totaling €1.48 trillion as of Dec 31, 2017.

It offers a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world. 

The bank has following operating segments: Corporate & Investment Bank, Private & Commercial Bank, and Deutsche Asset Management.

Disappointing Fourth Quarter Results

The bank reported net loss of €2.2 billion ($2.6 billion) for Q4 2017 compared with net loss of €1.9 billion ($2.3 billion) in the same quarter a year-ago.

In addition to non-cash charge of €1.4 billion resulting from a valuation adjustment on its deferred tax assets due to the tax reform, results were impacted by double-digit revenue declines in all three of its business units.

They attributed low volatility and decline in client activity as the main reasons for revenue decline.

Falling Estimates

Germany’s flagship bank has seen a plunge in earnings estimates as a result of weak performance and continued woes.

Zacks Consensus Estimates for the current and next year EPS are now $1.30 and $1.64 respectively down from $1.41 and $1.86, just 60 days ago.

The following chart shows negative earnings and price momentum:

The Bottom Line

After strict regulatory norms imposed on big banks, they have been finding it difficult to generate profits in their investment banking and trading businesses.

Shares of this bank are down more than 28% year-to-date, but with looming CEO succesion and other uncertainties, the overall outlook for the bank remains very cloudy and it is safer to avoid the stock for the time being.

 

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