Deutsche Bank's Equities Business Slipping

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Deutsche Bank's(DB) equities business has been slipping in recent years despite the success of the firms fixed income business which so far has compensated for the decline.

Recent reports mention that among the top eight other global investment banks including competitors like Goldman Sachs(GS), JPMorgan(JPM), UBS(UBS), Bank of America(BAC) and Morgan Stanley(MS), Deutsche Bank's equities business has stumbled to seventh place this year from fourth in 2004.

We have a near $61 price estimate for Deutsche Bank, which is a significant premium to the current market price of the stock. We believe the current low price reflects the market's negative sentiments over the the growing European debt crisis compounded by uncertainty of the impact of the U.S. debt rating downgrade.

Deutsche Bank boasts of being ranked second among global investment banks in terms of total revenue generated by its sales and trading division. The bank's fixed-income business also rakes in more revenues than any other investment banks besides Goldman Sachs.

But impending capital requirement changes by the phased implementation of Basel III are expected to hit the fixed-income business beginning next year and will weigh on returns. The introduction of additional regulations like the Volcker Rule which put a ban on proprietary trading will also prohibit the firm's profitability.

Deutsche Bank is aware of its need to shift its focus to improve its equities operation, which have underperformed the firm's bond business. The bank has yet to establish a grip on the U.S. equities and derivatives market, which represents almost 50% of the global commissions revenue in equities.