Deutsche Mulls Raising Cost Savings Target As Q1 Disappoints

Deutsche Bank AG (DE:DBKGn) (NYSE:DB) is mulling to set fresh cost cutting targets, as reported by a German newspaper — Handelsblatt. Per people familiar with the matter, the bank experienced weak first-quarter performance.

Particularly, the investment banking segment remained dull during first three months of 2019, most notably in the area of securities trading.

Previously, Deutsche had plans to reduce adjusted costs by €1 billion to €21.8 billion in 2019 through additional headcount reductions, synergies from German retail merger and completion of the sale of Portuguese retail operations.

"With regard to the developments in the first quarter the board is assessing whether cost cuts planned so far are sufficient," per a Reuters article that quoted the German paper.

Merger talks with Commerzbank (DE:CBKG) could be another reason for raising cost savings target as Deutsche is facing criticism from the unions regarding the anticipated layoffs. Further, some major shareholders at the German lender have also expressed concerns about the deal.

On the back of some restructuring initiatives, Deutsche reported full-year net income of €341 million ($389.4 million) for 2018 against net loss of €735 million at the end of 2017. Yet, it faced a number of headwinds throughout the year.

The German bank’s name was included in the list of troubled banks, after it failed the second level of the Federal Reserve’s stress test on qualitative shortcomings. Further, its credit rating of a class of debt cut was downgraded to the lowest ranking. Also, it continued to encounter a number of legal probes, which kept costs elevated.

Shares of Deutsche have declined 24.8% over the past six months on the NYSE compared with 2.7% fall recorded by the industry.

The stock currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are Bank of Montreal (TO:BMO) , Lloyds Banking Group (LON:LLOY) PLC (NYSE:LYG) and Royal Bank of Canada (NYSE:RY) . 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 Bank of Montreal has been raised nearly 1% for the current year in the past 60 days. The company’s share price has jumped 15.2% in the past three months.

Lloyds has witnessed 2.4% upward earnings estimate revision for 2019 in the past 60 days. Its share price has risen 28.5% in the past three months.

Royal Bank of Canada’s shares have gained 11.1% in three months’ time. Its earnings estimates for 2019 have moved up slightly in the past 60 days.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

See Latest Stocks Today >>