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Deutsche Bank Sells Argentine Unit as Part of Overhaul Drive

Zacks Equity Research

In line with its strategy to streamline global operations, Deutsche Bank AG DB inked a deal to sell its Argentine subsidiary, Deutsche Bank S.A, to Banco Comafi S.A. Financial. Terms of the transaction remained undisclosed.

The deal is expected to be closed in first half of 2017. However, the German banking giant will continue to offer services to government, corporate and institutional clients in Argentina through its global and regional centers.

Karl von Rohr, the Chief Administrative Officer at Deutsche Bank, who is overseeing the bank’s Global Footprint Rationalization Program stated, “The sale of our subsidiary in Argentina is another mark of the progress we have been making towards our Strategy 2020 goal of becoming simpler and more efficient”.  Rohr further added, “I am pleased with the progress of the program to date. We are also well on track in executing our footprint rationalization plans in the other countries that were announced in October of last year.”

Following the success of its Strategy 2015+, Deutsche Bank is now focused on the successful execution of Strategy 2020, which was unveiled last year. The new strategy aims to simplify the bank’s business model, reduce complexity, risk and costs, and boost capital position. It outlines several initiatives including repositioning investment banking, reorganizing retail business, reducing workforce and trimming the geographic footprint.

Apart from Argentina, Deutsche Bank aims to close onshore operations in several other countries like Chile, Mexico, Peru, Uruguay, Denmark and New Zealand. It also plans to move trading activities in Brazil to global and regional locations.

Bottom Line

While the bank is expediting restructuring efforts, profitability of Deutsche Bank – one of the largest financial institutions in the world – as measured by total assets (€1.80 trillion as of Jun 30, 2016), remains under pressure due to a stressed operating environment with negative interest rates, a sluggish European economy and global headwinds. Management continues to see a challenging revenue environment in 2016, especially post the Brexit episode.
Also, while the company expects to settle significant cases this year, litigation headwinds are not likely to ease any time soon as the bank continues to struggle with numerous lawsuits and regulatory proceedings in and outside Germany. Notably, year to date, Deutsche bank lost more than 40% on the NYSE.




Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the foreign banks include KB Financial Group, Inc. KB, Australia & New Zealand Banking Group Limited ANZBY and Bank Itaú Unibanco Holding S.A. ITUB, each carrying a Zacks Rank #2 (Buy).

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DEUTSCHE BK AG (DB): Free Stock Analysis Report
BANCO ITAU -ADR (ITUB): Free Stock Analysis Report
AUST&NZ BKG-ADR (ANZBY): Free Stock Analysis Report
KB FINL GRP-ADR (KB): Free Stock Analysis Report
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