Deutsche Bank AG
) is scheduled to report its second-quarter 2014 results on
Tuesday, Jul 29.
In the last quarter, this foreign bank delivered disappointing
earnings with a 35.3% year-over-year decline in net income. The
lower top-line performance was due to a decline in client activity
reflecting low volatility and continuing uncertainty in emerging
markets. However, decreased expenses, lower provision for credit
losses and a strong capital position were the positives.
Will Deutsche Bank impress in the upcoming release after combating
the challenges the industry witnessed during the quarter? Let's see
what factors might have influenced the earnings report this time
Factors to Influence Q2 Results
Amid the worldwide economic volatility and the continuing Eurozone
crisis, the company is focused on building its capital level.
Strategy 2015+ efforts are encouraging and we expect such efforts
to help improve its operating efficiency.
Repositioning of business fundamentals to withstand any further
crisis remains the trend of non-U.S. banks in the quarter. Though
defensive actions like limiting expenses are still in place and
focus on non-interest income is increasing, margin compression and
sluggish loan growth would act as the major dampeners.
Further, a prolonged low interest rate environment is not expected
to reverse any time soon as central banks of most of the countries
will continue to prioritize growth over inflation control. This
strategy is sustainable as inflation is the concern of only a few
emerging economies. Thus, banks operating in a low interest rate
environment will not be able boost revenue through interest income.
The Federal Reserve's stricter capital rules for foreign banking
organizations (FBOs) sizably operating in the U.S. could cripple
their balance sheet. Anyway, amid several litigation issues and
internal inefficiencies, this foreign bank is striving hard through
restructuring initiatives that focus on building capital levels to
achieve operational efficiency and reduce risk-weighted assets
Activities of Deutsche Bank during the quarter were inadequate to
win analysts' confidence. As a result, the Zacks Consensus Estimate
for the quarter remained stable at 50 cents per share over the last
Our proven model does not conclusively show that Deutsche Bank is
likely to beat the Zacks Consensus Estimate in the second quarter.
That is because a stock needs to have both a positive
and a Zacks Rank #1 (Strong Buy) or at least 2 or 3 for this to
happen. Unfortunately, this is not the case here as elaborated
The Earnings ESP for Deutsche Bank is 0.00%. This is because
both the Most Accurate estimate and the Zacks Consensus Estimate
stand at 50 cents.
Deutsche Bank's Zacks Rank #3 (Hold) increases the predictive power
of ESP. However, we also need to have a positive ESP to be
confident of an earnings surprise call.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as our model shows
that these have the right combination of elements to post an
earnings beat this quarter:
Banco Bradesco S.A. (
) has an earnings ESP of +2.63% and carries a Zacks Rank #3 (Hold).
It is scheduled to report its second-quarter results on Jul 31.
The earnings ESP for Banco Santander-Chile (
) is +12.96% and it carries a Zacks Rank #3 (Hold). The company is
scheduled to release its second-quarter results on Jul 31.
Royal Bank of Canada (
) has an earnings ESP of +3.62% and carries a Zacks Rank #2 (Buy).
It is scheduled to report its third-quarter fiscal 2014 (ended Jul
31) results on Aug 22.
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