NEW YORK (TheStreet) -- Shares of Deutsche Bank (DB - Get Report) are down -0.58% to $32.63 after it was reported that the German bank, under fire from U.S. regulators over what they see as weak systems and financial controls, has been formally ordered to clean up its act as part of a confidential pact with the authorities, sources told the Wall Street Journal.
The private "memorandum of understanding" with the Federal Reserve Bank of New York and New York's Department of Financial Services demands that Deutsche Bank overhaul its technology and compliance procedures, and fix what the regulators describe as serious risk-management deficiencies, according to people familiar with the accord, the Journal said.
TheStreet Ratings team rates DEUTSCHE BANK AG as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
Must Read: Warren Buffett's 25 Favorite Stocks
"We rate DEUTSCHE BANK AG (DB) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The share price of DEUTSCHE BANK AG has not done very well: it is down 24.08% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 32.5% when compared to the same quarter one year ago, falling from $466.56 million to $315.03 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, DEUTSCHE BANK AG underperformed against that of the industry average and is significantly less than that of the S&P 500.
- DB, with its decline in revenue, slightly underperformed the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 3.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- DEUTSCHE BANK AG's earnings per share declined by 40.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DEUTSCHE BANK AG increased its bottom line by earning $1.01 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($2.17 versus $1.01).
- You can view the full analysis from the report here: DB Ratings Report