Deutsche Bank AGÂ (DBÂ -Â Analyst Report) is scheduled to report its third-quarter 2016 results on Oct 27.
In the last quarter, the German banking giant had reported a significant decline in net income on a year-over-year basis. The quarterly results were affected by lower revenues and higher provisions. However, the reduction in non-interest expenses was a positive factor.
Notably, year to date, Deutsche Bank has lost more than 40% on the NYSE, reflecting investors’ concern amid a challenging operating environment with low sometimes even negative rate scenario and global economic slowdown. Investors’ worries over the bank’s growth prospects were further aggravated following its confirmation of the proposed $14-billion settlement by the U.S. Department of Justice tied with mortgage practices.
DEUTSCHE BK AG Price
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Will the upcoming earnings release put further pressure on Deutsche Bank stock? It depends largely on whether the company is able to report improved profitability this earnings season. Let’s see what factors might have influenced the earnings report this time around.
Factors to Influence Q3 Results
Profitability of Deutsche bank should continue to suffer amid negative interest rates, sluggish growth of the European economy as well as global headwinds. However, the bank’s revenue challenges should ease to some extent as it is expediting Strategy 2020 efforts to revamp the bank, with focus on simplifying the bank’s business model, reducing costs and shedding unprofitable businesses.
During the third quarter, the trading environment was decent as global financial markets experienced volatility due to several factors, including the Brexit vote. The bank’s trading revenues are likely to improve primarily, driven by higher fixed-income trading. Trading in equities is likely to typically remain subdued due to lesser client activities.
However, revenues from advisory and underwriting are not likely to witness and significant improvement, as M&A activities and IPOs continued to decline during the quarter in the wake of global economic concerns.
Though Deutsche Bank remains focused on expense management, it has been embroiled in several lawsuits and investigations. As a result, some additional reserves for litigation expenses might have been sidelined, which could hurt the bottom line to some extent. Also, the quarterly results are likely to reflect the impact of several ongoing restructuring measures. Restructuring and severance charges, as such, should remain high.
However, Deutsche Bank’s ability to cope with broader industry challenges amid its overhauling moves remains a key area to watch this earning season.
Deutsche Bank currently carries a Zacks Rank # 2 (Buy).Â
