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Deutsche (DB) Turns Conservative in Lending to Wealthy Clients

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Per a Bloomberg article, Deutsche Bank AG (DB - Free Report) has laid down stricter lending conditions, even for wealthy clients, due to the pandemic scare.

Head of International Private Bank unit, Claudio de Sanctis, told Bloomberg that the bank seeks to take a “more conservative approach” toward sectors, including aircraft, commercial real estate, retail and travel, which have been hit hard by the coronavirus outbreak.

As of Sep 30, 2020, Deutsche Bank’s loans exposure to above mentioned sectors, along with oil and gas, was about €46 billion or 11% of the total loans. The article said that the bank’s wealth management segment witnessed “deleveraging” at the beginning of 2020, which later turned into “a strong rebound” in loan growth during the middle two quarters. Also, de Sanctis believes that the strong momentum has continued in the fourth quarter of 2020.

Notably, the company is on track to improve its financial position by undertaking massive restructuring. Recently, it entered into an agreement with Tata Consultancy Services to sell the bank’s technology services unit, Postbank Systems AG.

Remarkably, with this deal, Deutsche Bank moved a step ahead with its restructuring plans announced last July and expects integration costs of 120 million euros ($142.69 million).

Though Deutsche Bank is adhering to measures to revive the business and control costs, it is still plagued by several headwinds and is under the close scrutiny of investors. Also, litigation issues related to past misconducts and legal costs might impede bottom-line growth.

Shares of Deutsche Bank have gained 42.8% over the past six months compared with the 35.3% rally of the industry.

Currently, Deutsche Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Earnings estimates for the ongoing year for Royal Bank of Canada (RY - Free Report) moved slightly north over the past 60 days. The company’s shares have gained 28.7% over the past six months. It currently has a Zacks Rank of 2 (Buy).

UBS Group AG (UBS - Free Report) has witnessed a 19.7% upward earnings estimate revision for the current year in the past 60 days. This Zacks Rank #2 stock has gained 41.2% over the past six months.

The Bank of N.T. Butterfield & Son Limited (NTB - Free Report) 2020 earnings estimates have moved 6.2% north over the past 60 days. The company’s shares have rallied 47.5% over the past six months. It carries a Zacks Rank of 2 at present.

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