Bank of America downgrades Deutsche Bank as it struggles to improve profitability

It’s time to sell shares of Deutsche Bank , according to Bank of America. Analyst Rohith Chandra-Rajan downgraded shares to underperform from neutral, as the European bank deals with challenges around profitability. “We see Deutsche Bank struggling to improve profitability as growth is heavily volume reliant, consuming cost and capital resources. This likely limits RoTE to 6-7% with weak profitability and regulatory headwinds constraining capital distribution,” Chandra-Rajan wrote in a Friday note. Deutsche Bank shares are outperforming this year. The European bank stock is up more than 8% in 2023, better than the S & P 500’s 6% gain. It’s also outperforming the Europe’s benchmark index, the Stoxx 600, to start the year. In 2022, Deutsche Bank shed nearly 6%, still outperforming over the broader index’s roughly 19% fall. Still, the analyst sees “modest downside” downside going forward. Deutsche’s U.S.-listed shares dell 2.8% in the premarket. The analyst expects core growth will slow to 3% in 2022 to 2025, a likelihood that does not seemed to be priced into the stock, according to the note. “We see stronger momentum, better profitability and more attractive capital distributions elsewhere in European Banks on 7.5x PE and downgrade Deutsche Bank to Underperform,” Chandra-Rajan added. –CNBC’s Michael Bloom contributed to this report.

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