- Thomson Reuters
- Wall Street analysts are increasingly bearish on Deutsche Bank.
- Of the 32 analysts that cover the bank, only one has a “buy” rating.
- Deutsche Bank investor Cerberus is now a paid adviser to the lender.
- Watch Deutsche Bank trade live.
Wall Street analysts are increasingly bearish on Deutsche Bank, with 31 of the 32 analysts covering the company not suggesting to buy the stock. In fact, 18 say “sell,” 13 say “hold,” and just one says “buy.” The lone analyst recommending the stock, Neil Smith of Bankhaus Lampe, does not have a single “sell” rating on any of the 14 companies in his coverage universe.
Deutsche Bank has come under intense pressure as of late, with its shares down 42% over the past 12 months. The German lender has been struggling to reduce costs after widely missing analysts’ earnings expectations for 2018. Should its restructuring efforts fail, there have been reports the German government could orchestrate a merger between Deutsche Bank and rival Commerzbank.
In addition to reigning in costs, DB is dealing with a number of issues including a $1.6 billion loss on a municipal bond trade, increased funding costs, and a host of legal challenges. The company has paid more than $18 billion in legal fines over the past decade, an amount on par with its current market capitalization of $18.9 billion.
Cerberus Capital Management and Hudson Executive Capital have been betting big on the stock. They both have amassed stakes of around 3%, amounting to investments in the hundreds of millions of dollars. Significant shareholders also include the Qatari royal family and BlackRock.
“My investment is based on my belief that Deutsche Bank now has the right guy in the right job at the right time,” Doug Braunstein, head of Hudson Executive Capital and former JPMorgan CFO, told American Banker. “Christian has a background and a reputation, and a very good one, as saying something and doing what he says and hitting what he says.”
Meanwhile, Cerberus has been stepping up its involvement in the bank’s operations, with the private-equity giant now acting as a paid adviser to Deutsche Bank alongside its roles as an investor and banking client. The Wall Street Journal says that Matt Zames, former JPMorgan COO and current president of Cerberus, now reports directly to DB CEO Christian Sewing and has been pushing the bank to invest its cash reserves more aggressively.
“Although management is doing all the right things in terms of what is in their control and we recognize this turnaround is difficult,” said JPMorgan analyst Kian Abouhossein in a February 1 note.
“The big question is on revenues in our view where it is not clear that the CIB franchise is turning around as of yet.”