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Deutsche Bank to Divest Distressed Shipping Loan Portfolio

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Per a Reuters article, Deutsche Bank DB is selling its non-performing ship loan portfolio, which has a notional value of $1 billion to Oak Hill Advisors and Varde investors.

The German lender aims to reenter the transport lending business after discarding these bad loans, Reuters reported, citing people familiar with the matter. Per the sources, the bank will be selling some performing loans from shipowners as well.

Post the sale, Deutsche Bank will still be left with a small portion of non-performing ship loans. Over the years, the bank has trimmed its exposure to shipping and other maritime lending due to a large number of write-downs.

On the other hand, HSH Nordbank, Germany-based ship financier, is looking to buy performing shipping loans from other banks and make new investments in the industry, after having gone through a lot of trouble over the years on account of its high-risk shipping loan book.

Deutsche Bank’s divesture of distressed loan portfolio marks another one of the new CEO, Christian Sewing’s overhaul moves to save the bank from failing. Lately, the bank has been lowering its global exposure with an aim to bolster financials by driving performance in areas of strength.

Earlier this month, Bloomberg reported that Deutsche Bank is looking for a suitable buyer for its non-investment grade energy loans portfolio worth nearly $3 billion for which it has already approached its North American and European peers. It expects to sell the portfolio at par value.

Sewing has been undertaking various initiatives aimed at improving financial performance, such as its impressive €2 billion cost savings target. However, 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 a year's time, the stock has lost 35.5% on the NYSE versus 1.6% growth 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 28% 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 28% in the past year.

Bank of N.T. Butterfield & Son’s shares have gained more than 42% in a year. Its earnings estimates for 2018 have moved up 3.5% in the last 60 days.

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