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Deutsche Divests Energy Loan Portfolio to Bank of Montreal

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Deutsche Divests Energy Loan Portfolio to Bank of Montreal

Deutsche Bank (DB) remains on track to offload unprofitable business and focus on core operations in order to improve financials.

Deutsche Bank AG DB has found a suitable buyer in Bank of Montreal BMO for its $3 billion worth energy loan portfolio that includes investment-grade and subprime revolving credit lines to oil and gas companies. The news was reported by Bloomberg.

In May 2018, the German lender 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.

In June 2018, the Frankfurt-based bank had offloaded another of its distressed shipping loan portfolio, which has a notional value of $1 billion, to Oak Hill Advisors and Varde investors. The bank aimed to reenter the transport lending business after discarding these bad loans.

Deutsche Bank’s strategy to divest distressed loan portfolio marks another one of its 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.

Sewing has been 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 — the Corporate & Investment Bank segment.

Despite 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 19.2% on the NYSE compared with 13.2% decline recorded by the industry.

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

A couple of better-ranked stocks in the same space are The Bank of N.T. Butterfield & Son Limited NTB and Hang Seng Bank Ltd. HSNGY. Both 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 N.T. Butterfield has been raised nearly 1% for the current year, in the past 60 days. The company’s share price has jumped more than 40% in the past year.

Hang Seng has witnessed stable earnings estimates for 2018, in the past 30 days. Its share price has risen more than 12% in the past year.

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Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report
 
Bank of N.T. Butterfield & Son Limited (The) (NTB) : Free Stock Analysis Report
 
Hang Seng Bank Ltd. (HSNGY) : Free Stock Analysis Report
 
Bank Of Montreal (BMO) : Free Stock Analysis Report
 
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