Why Deutsche Bank (DB) Stock Is Falling Today

NEW YORK (TheStreet) -- Deutsche Bank (DB) shares are down -1.8% to $34.82 on Tuesday following reports that the bank has begun settlement negotiations with U.S. regulators over allegations of money laundering violations.

The investigation stems from the banks alleged dealings with Iran and other countries the U.S. has blacklisted. Regulators accuse the German bank of laundering funds from companies in Iran and Sudan through its U.S. business operations.

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Fellow German Bank Commerzbank (CRZBY) is expected to pay at least a $500 million fine for the same charges according to a New York Times article today. That pending fine is expected to the the precursor to a Deutsche Bank settlement later this summer.

This news comes following last week's record settlement by French Bank BNP Paribas  (BNPQY) for $8.9 billion due to similar allegations. 

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:

"We rate DEUTSCHE BANK AG (DB) a SELL. This is driven by a few notable weaknesses, 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, disappointing return on equity and weak operating cash flow."

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 14.33% 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 29.5% when compared to the same quarter one year ago, falling from $2,115.92 million to $1,492.05 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, DEUTSCHE BANK AG's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$5,273.84 million or 153.05% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for DEUTSCHE BANK AG is currently very high, coming in at 72.33%. Regardless of DB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.61% trails the industry average.
  • You can view the full analysis from the report here: DB Ratings Report
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