Shares of German banking giant, Deutsche Bank AG (DB - Analyst Report) plummeted approximately 11% on NYSE, since its confirmation of the proposed $14-billion settlement by the U.S. Department of Justice (“DoJ”) tied with mortgage practices. Since then the stock has touched its lowest levels in decades.
Apart from this, the media reports about the government’s lack of support to Deutsche Bank before Germany’s national elections in Sep 2017 (though later denied) did not help the stock either. The huge litigation burden continues to weigh on the bank’s results. Further, the company’s profitability is vulnerable to a stressed operating environment with negative interest rates, sluggish European economy and global headwinds.
Concerns pertaining to the bank’s capital position continue to weigh on market sentiments. Earlier this year, the Federal Reserve objected to the capital plan of its U.S. unit, Deutsche Bank Trust Corporation for the second consecutive year. While rejecting its capital plan, the Fed noted “broad and substantial weaknesses" in its capital planning processes, and insufficient progress it "made toward correcting those weaknesses and meeting supervisory expectations.”
Moreover, per a report released by The International Monetary Fund in June, Deutsche Bank, which is highly interconnected with other large global financial institutions, is the riskiest lender in the world that could affect the broader financial system.
Given these concerns, analysts are bearish on the stock. This is evident from the downward estimate revisions. The Zacks Consensus Estimate for 2016 has decreased nearly 71% over the last 90 days. Further, the company’s stock has been witnessing a steady decline. Year-to-date, the shares have tumbled more than 45% on NYSE.
Deutsche Bank currently carries a Zacks Rank #3 (Hold) and a VGM Score of F. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. Hence, the stock does not look promising at present.
Selecting Favorable Foreign Bank Stocks
While Deutsche Bank doesn’t appear to be an attractive pick right now, there are a few other foreign bank stocks that have a better Zacks Rank and VGM score.
With the help of the Zacks Stock Screener, we have zeroed in on three foreign banks with a VGM Score of A or B and a Zacks Rank #1 or #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Argentina-based Grupo Financiero Galicia S.A. (GGAL - Snapshot Report) is a financial services holding company providing various financial products and services in Argentina. The stock has a VGM Score of B. Further, this Zacks Rank #1 stock has been witnessing upward estimate revisions for the current year over the last 60 days. The Zacks Consensus Estimate for 2016 has revised 4.7% up over the same period.
Toronto, Canada-based, Canadian Imperial Bank of Commerce (CM - Snapshot Report) is a diversified financial institution providing various financial products and services in Canada and world-wide. The stock has a VGM Score of B. Further, over the last 60 days, this Zacks Rank #2 stock has been witnessing upward estimate revisions for 2016. The Zacks Consensus Estimate increased 4.9% over the same period.
Banco Santander, S.A. (SAN - Snapshot Report) , headquartered in Madrid, Spain, provides various retail and commercial banking products and services for individual and corporate clients. The stock has a VGM Score of B. The Zacks Consensus Estimate for 2016 for this Zacks Rank #2 stock has increased by a penny.
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