How Will Deutsche Bank (DB) Stock Be Affected By New York Fed Findings?

NEW YORK (TheStreet) -- Deutsche Bank's  (DB) U.S. operations weer found to have serious problems by the Federal Reserve Bank of New York, including shoddy financial reporting, weak technology and inadequate auditing and oversight, sources told Reuters.

In a letter to the German lender's executives last December, a senior official with the New York Fed described financial reports produced by some of the bank's U.S. divisions as "low quality, inaccurate and unreliable", said a source, Reuters said.

Shares of Deutshce Bank are up 2.44% to $35.65 in late afternoon trading..

 

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 number of negative factors, 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 19.20% 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 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.
  • 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 the cash generation rate to the industry average, the firm's growth is significantly lower.
  • DB, with its decline in revenue, slightly underperformed the industry average of 0.1%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: DB Ratings Report

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