Per Financial Stability Board’s (“FSB”) list of global systemically important banks (G-SIB) published late last week, Deutsche Bank (DB - Free Report) has been moved from bucket 3 to bucket 2. This shift indicates that the authorities are now considering the German bank less risky for the financial system.
As a result of this change, Deutsche Bank will now be required to hold lower leverage ratio from 2022. Its risk-based capital requirements will not be altered as they are controlled by the German regulator BaFin. Also, the list is based on data as of 2018-end and does not take into account the changes in 2019.
JPMorgan Chase (JPM - Free Report) topped the list yet again and is still considered the most systemically important bank. Toronto-Dominion Bank (TD - Free Report) was a new addition made to the G-SIB list at the lowest level.
Deutsche Bank’s overhaul under the leadership of its new CEO, Christian Sewing, has started to bear fruit. Further, Sewing is on track with his radical restructuring plans announced in July 2019, which involves massive job cuts and exit from equities trading business.
The bank also remains involved in offloading its unprofitable business. In September, Deutsche Bank entered into a deal with BNP Paribas (BNPQY - Free Report) , per which, the former will transfer its prime brokerage business to the latter.
Though Deutsche Bank’s restructuring efforts, including cost-saving measures, look encouraging, it is difficult to determine how much the bank will gain, considering the prevalent headwinds. Dismal revenue performance is another concern.
Shares of Deutsche Bank have lost around 9.7% on the NYSE year to date against the industry’s growth of 4.1%.
Deutsche Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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