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Deutsche Bank's CFO Expects 3Q Earnings to Meet Expectations

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Deutsche Bank's CFO Expects 3Q Earnings to Meet Expectations

Deutsche Bank (DB) expects to report higher-than-expected costs in Q3. Yet, the company is focused on improving its financials by trimming expenses and cutting back on unprofitable businesses.

Deutsche Bank Aktiengesellschaft’s DB Chief Financial Officer, James von Moltke, hinted that third-quarter 2018 pretax profit is likely to be in line with the consensus estimate of €327 million, at an investor conference held in London.

On the cost front, he mentioned that adjusted costs might come slightly above €5.5 billion compared with a consensus estimate of €5.45 billion. However, he reiterated that the Frankfurt-based bank remains focused on reducing costs to €23 billion in the current year from €23.9 billion incurred in 2017.

Moreover, he was positive on the current overall economic scenario and stated it to be beneficial for the banking industry. Also, Moltke said that Deutsche Bank expects its operating margin to increase in the quarters ahead.

Having taken his post in April 2018, CEO, Christian Sewing, worked 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 business segments, post which, it laid down various targets for trimming headcount.

However, the bank still lacks proper internal control processes, as a result of which, the German financial regulator — BaFin — recently ordered it to improve anti-money laundering controls. Also, the regulator has appointed a monitor to report and assess the progress of the ordered measures.

Despite Sewing’s various financial targets aimed at improving financial performance, Deutsche Bank continues to be impacted by litigation issues related to past misconducts, which are yet to resolved. Also, legal costs might hamper bottom-line growth. Also, top line remains under pressure owing to low interest rates.

In six month's time, the stock has lost 13.6% on the NYSE compared with 9.2% decline recorded by the industry.

Deutsche Bank currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are BNP Paribas SA BNPQY, The Bank of N.T. Butterfield & Son Limited NTB and Credit Agricole SA CRARY. 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.

BNP Paribas has witnessed 10% upward estimates revision for 2018, in the past 60 days. Its share price has risen 4.6% in the past three months.

The Zacks Consensus Estimate for Bank of N.T. Butterfield has remained stable for the current year, in the past 60 days. The company’s share price has jumped 11.6% in the past three months.

Credit Agricole has witnessed 8.3% upward earnings estimates revision for 2018, in the past 30 days. Its share price has risen 14.5% in the past three months. 

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