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Deutsche Targets Majority Cost Savings From Investment Bank

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Of the €2 billion cost cuts announced in May 2018, Deutsche Bank (DB - Free Report) expects to see more than half of the savings from its investment banking segment. Chief Financial Officer, James Von Moltke, also indicated that the Germany-based lender might continue to lag its peers in performance in the second quarter.

With an aim to boost profitability, the bank had disclosed its strategic plans to reduce expenses to €22 billion by 2019. It seeks to achieve this target in part by cutting nearly 7000 jobs. Deutsche Bank remains committed to streamlining operations outside Germany, and the majority of reductions in headcount is expected in the United States.

At a conference held in Wednesday, Moltke mentioned that the bank is currently targeting to reduce headcount to below 93,000 from 97,000 by the end of 2018. He also said that the bank is likely to report a fall in revenues for the June-ending quarter as it continues to restructure its operations and reduce workforce.

"We have the resources and we need to succeed. We simply need to gain positive momentum.", he added.

Having incurred annual loss in three consecutive years on account of challenging market scenarios and falling investment banking revenues, the new CEO, Christian Sewing aims at providing a speedy turnaround to the bank’s performance. By 2021, Deutsche Bank targets to deliver return on tangible equity of around 10% and above 4% in 2019.

Last week, the bank was facing a big turmoil from ratings downgrade by a top agency and from being sued with criminal charges for alleged “cartel” conduct over the sale of ANZ Bank’s shares, back in 2015. Also, shares of Deutsche Bank were impacted by the disclosure that it was listed as a troubled bank by the Federal Reserve.

Though Deutsche Bank’s profitability remains threatened by a stressed operating environment and sluggish growth of the European economy, steps undertaken by the CEO to achieve various financial targets might lend some support.

In six months’ time, the bank’s shares have lost 41.4% on the NYSE compared with 7.5% decline recorded by the industry.

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

Some better-ranked stocks in the same space are Credicorp Ltd. (BAP - Free Report) , Banco Santander Chile (BSAC - Free Report) and The Bank of N.T. Butterfield & Son Limited (NTB - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Credicorp has been raised nearly 1% for the current year, in the last 60 days. The company’s share price has jumped more than 33% in the past year.

Banco Santander Chile has witnessed stable earnings estimates for 2018, in the last 60 days. Its share price has risen more than 32% in the past year.

Bank of N.T. Butterfield & Son’s shares have gained more than 43% in a year. Its earnings estimates for 2018 have moved up 4.1% in the last 60 days.

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