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Deutsche Bank Seeks to Divest $3B Energy Loan Portfolio


Per a Bloomberg article, Deutsche Bank DB is looking for a suitable buyer for its non-investment grade energy loans portfolio worth nearly $3 billion. Moreover, the energy segment is expected to be closed by end of this quarter

Citing people with knowledge of the matter, Bloomberg reported that Deutsche Bank has already approached its North American and European peers with the offer. It expects to sell the portfolio at par value.

In May 2018, the German lender, had announced plans to shut down its energy-focused Houston office and exit oil and gas advisory business as part of its strategy to trim U.S. operations, as it fails to compete with the well-established U.S. rivals.

The new CEO, Christian Sewing, is working toward staging a turnaround for Deutsche Bank with support from impressive cost savings plans along with reducing dependence on its volatile source of revenues, Corporate & Investment Bank segment.

As part of its strategic plans, the bank had conducted a review of its Equities Sales & Trading business, post which, it laid down a target of trimming headcount in the area by 25%.

Bloomberg reported that Deutsche Bank is pulling back coverage of onshore sales and derivatives in individual markets across the Asia-Pacific. The impact on jobs from this move remains uncertain. However, the bank will remain focused on serving its large clients and electronic equities business in the area.

Recently, at a conference, the bank’s CFO indicated that Deutsche Bank might report a fall in revenues for the June-ending quarter as it continues to restructure its operations and reduce workforce. He also noted that the investment banking segment would be the largest contributor of the bank’s €2 billion cost savings target.

(Read more: Deutsche Targets Majority Cost Savings From Investment Bank)

Despite Sewing’s various financial targets aimed at improving financial performance, Deutsche Bank’s profitability remains threatened by a stressed operating environment and sluggish growth of the European economy. Also, litigation issues related to past misconducts continue and legal costs might hamper bottom-line growth.

In six months’ time, the stock has lost 40.3% on the NYSE compared with 5.4% 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, Banco Santander Chile BSAC and The Bank of N.T. Butterfield & Son Limited NTB. 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 37% 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 34% in the past year.

Bank of N.T. Butterfield & Son’s shares have gained more than 39% in a year. Its earnings estimates for 2018 have moved up 4.1% in the last 60 days.

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