Deutsche Bank's Rating Downgraded by Fitch, Outlook Stable

Deutsche Bank AG’s DB long-term credit grade was cut one level by Fitch Ratings Inc. The rating agency stated that the lender will take longer to stimulate growth under a plan, which was unveiled in March. Also, Autonomous Research LLP referred to the bank as “beyond repair,” except there’s a sudden “miracle” jump in its bond trading business, which was once a booming unit.

Chief executive officer of the Frankfurt-based lender, John Cryan, had settled misconduct lawsuits and raised €8 billion in late 2016. However, his growth plans are now on rocky grounds as the second quarter saw the weakest revenue performance in the past three-and-a-half years.

Fitch analysts wrote in a statement, “We no longer expect revenue to demonstrate any clear signs of franchise recovery this year, and we expect necessary further restructuring costs to continue to erode net income." They also believe that the loss in market share experienced by the bank last year because the clients stopped doing business with the lender, as they were doubtful about the bank’s capital strength, will take more time to reverse. Low volatility and interest rates in Europe will continue to affect the bank’s revenues.

Though the rating for Deutsche Bank was reduced from A- to BBB+, the outlook was set to stable by Fitch. Moody’s Investor Services has rated the bank’s credit Baa2 since May 2016, whereas S&P Global Inc. raised their rating to A- from BBB+ this March, stating that a retroactive change in German Law will protect senior creditors.

Shares of Deutsche Bank have gained 31.7% in a year, outperforming the industry’s rally of 29.7%.

Currently, the bank carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the same space are Bank of Nova Scotia BNS, Bank of Montreal BMO and HSBC Holdings PLC HSBC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bank of Nova Scotia has witnessed upward earnings estimate revision of 8.3% for the current year, in the past 60 days. Moreover, its shares have gained 20.6% in the last 12 months.

Bank of Montreal’s current-year earnings estimates have been revised 8.7% upward over the last 60 days. Further, its shares have rallied 16.4% in the last 12 months.

HSBC Holdings’ earnings estimates have been revised upward by 4.2% for the current year in the past 60 days. Also, its share price has increased 30.5% in the last 12 months.

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Deutsche Bank AG (DB) : Free Stock Analysis Report
 
Bank Of Montreal (BMO) : Free Stock Analysis Report
 
Bank of Nova Scotia (The) (BNS) : Free Stock Analysis Report
 
HSBC Holdings PLC (HSBC) : Free Stock Analysis Report
 
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