Deutsche Bank's (DB) Internal Control Under Scrutiny in U.S.

Deutsche Bank AG’s DB is once again under probe by U.S. regulators, this time regarding its dealings with Russian oligarchs. The news was reported by Reuters, citing three people familiar with the matter.

The German lender had handed transaction records, emails and other documents, such as account applications, know-your-client money laundering checks, internal assessments of "suspicious activity", and information about loans and mortgages to the officials.  Post this, the lapses were identified.

One such lapse was related to ignorance of managers. Deutsche Bank’s staff had reported concerns about new and existing Russian clients and transactions, which was left unattended by the seniors.

Another lapse related to whether the bank allowed illegal funds to flow into the United States as a correspondent bank, where it processes transactions for others, the article reported.

However, the sources said that the probe is in early stage and it is not confirmed whether any action will be taken against the bank.

Troy Gravitt, a Deutsche Bank spokesman, said that the bank will remain committed to co-operate with the investigation.

Deutsche Bank remains involved in a number of probes such as one involving Citigroup C regarding Australian cartel case. Also, it came under scrutiny of the U.S. Department of Justice regarding its role in state fund 1Malaysia Development Berhad.

Also, these investigations come at a time when Deutsche Bank announced its major restructuring plan in a bid to improve long-term profitability. It seeks to achieve a fresh set of targets by 2022 without raising additional capital.

However, dismal revenue performance on account of low interest rates in domestic economy, and involvement in legal issues remain key concerns.

Shares of Deutsche Bank have lost 10.9% on the NYSE in the past six months compared with the industry’s decline of 9.6%.

The stock currently carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the finance space are Royal Bank of Canada RY and Credit Agricole SA CRARY. Both these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Royal Bank of Canada has been raised slightly for the current year in the past 30 days. The company’s share price has gained 11.7% so far this year.

Credit Agricole has witnessed slight upward revision in earnings estimates for 2019 in the past 30 days. Its share price has risen 9.6% year to date.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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