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Deutsche Bank’s (DB) Restructuring Moves Might Take 3 Years

Zacks

Co-head of Deutsche Bank’s DB corporate and investment division (CIB), Garth Ritchie, revealed to a German daily, Handelsblatt, that the bank’s restructuring plans for the division are likely to be completed in another two to three years.

Per Ritchie, the plan might get executed in two years’ time if the markets turn favorable for the bank. However, continuation of the sluggish nature would extend it to three years.

Co-head, Marcus Schenck informed that none of the shareholders have objected to the bank’s strategies.

Background

The past few years have been tough for Deutsche Bank due to numerous litigations and regulatory proceedings in and outside Germany, unstable European economy at the time and the lender’s involvement in scandals. These factors impacted profits greatly, bringing the bank on the edge of a great fall.

Before its capital raise in March 2017, the bank had set several targets for achieving a turnaround. Among these targets, it disclosed plans to merge corporate finance, global markets and global transaction banking businesses into one unit — CIB.

CEO John Cryan expects this move to make the bank simple and stronger, resulting in improved services and better resource allocation.

Schenck has been assigned the role to look over corporate finance, global capital markets and the institutional client group. Ritchie would be looking after products and processes, equities, fixed income and currencies, global transaction banking, electronic trading, listed derivatives and clearing, research and the division's technology and operations.

Bottom Line

Despite these measures, continued decline in profits in segments along with low volatility in markets are concerns for the bank. Shareholders have started to question Cryan’s ability to save the bank from collapse. Though the lender has been successful in achieving cost cut targets, a significant turnaround is still awaited.

Shares of Deutsche Bank have gained 5% year to date, underperforming the 19.2% rally for the industry it belongs to.



Currently, the stock carries a Zacks Rank #3 (Hold).

Some foreign banks worth considering are Bank of N.T. Butterfield & Son Limited NTB, Credicorp Ltd BAP and Shinhan Financial Group SHG. 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.

Bank of N.T. Butterfield & Son’s Zacks Consensus Estimate for current-year earnings has been revised 2.2% upward in the last 60 days. The company’s share price has risen almost 26.5% year to date.

Credicorp’s current-year earnings estimates have been revised slightly upward over the last 60 days. Also, its shares have gained 35.4% so far this year.

Shinhan Financial’s Zacks Consensus Estimate for current-year earnings has moved 8.5% up over the last 60 days. Its share price has rallied 19.6% year to date.

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