Deutsche Bank Announces Restructuring Plan

Deutsche Bank (Ticker Symbol: DB) announced a massive restructuring plan over the weekend.  The German bank stated that it is looking to cut over 18,000 jobs over the next three years by 2022, reducing to a total workforce of around 74,000 global employees.  The bank announced it would be scaling back its investment banking business and will also be shutting down its global institutional sales and trading business in a move to help improve the companies overall profitability.  Deutsche Bank is also attempting to greatly reduce its adjusted costs each quarter to $19 billion over the coming years.  

Deutsche Bank’s job cuts will be spread across all of its operations across the globe.  Over the past several years, the stock has been under pressure due to an array of different scandals and a failure to merge with domestic rival Commerzbank, which would have helped support its trading and investment banking business.  The bank’s board of directors is working hard to set goals that are achievable so they won’t have to go through a restructuring plan similar to this one for a long time.  

Above is a long term chart of Deutsche Bank’s stock price over the past 15 years.  In the middle of 2003, the stock found some price support just above the $30.00 price level.  Deutsche Bank’s stock then began to bottom, forming a Double Bottom reversal pattern. This occurs when the price of a stock reaches a low price, has a small rally, then retests that low, failing to break below it.  The pattern is confirmed once it breaks below the high between the two prior lows. The stock proceeded to rally, finding technical support at its 100-week Moving Average in 2004 and 2005. Deutsche Bank continued to rally over 100% to trade to an all-time high of $140.04 on May 7, 2007.   

Deutsche Bank’s stock spent from the beginning of 2006 until the first quarter of 2008 forming a Head and Shoulders topping formation. Traders and investors sometimes look at Head and Shoulders patterns for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Deutsche Bank’s case. Some traders use what’s called a “measured move”, to try and project where the stock might go in the future based on breakouts from technical formations.  In Deutsche Bank’s case, one would take the top price from the head of the pattern (roughly $140) and the price of the neckline from the pattern (roughly $90) then subtract them to get the difference ($50). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move: Neckline – Difference = Measured Move. In Deutsche Bank’s case, the projected price target from the Head and Shoulders pattern was roughly $40.00, which it achieved in the fourth quarter of 2008. 

Deutsche Bank’s stock has spent over the past ten years in a falling wedge pattern. This pattern is marked by a series of lower tops and lower bottoms.  The pattern is usually bullish and can have a tendency to break out to the upside, given a proper catalyst. 

(Chart above courtesy of ​www.tipranks.com​)  

Based on a survey of 14 analysts offering 12-month price targets, the average price target for Deutsche Bank’s stock is $7.58.  According to that number, the stock is priced right in-line with Wall Street analysts’ average price targets and could be considered at value around current levels near $7.61.  

Restructuring can be tough on company’s employees but is sometimes a necessary process to help get a business back on track.  Clearly, Deutsche Bank has a long and hard journey ahead of it on the path to becoming a top tier bank once again. Investors in the space should look to Deutsche Bank’s earnings release this month on the 25th for fresh news within the company.  

 


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