Spain’s National Securities Market Commission (CNMV) has commenced “disciplinary proceedings” against German lender Deutsche Bank AG (DE:DBK) for misleading domestic clients while selling complex derivative instruments. The CNMV has alleged that Deutsche Bank officers did not disclose the exact nature and risks/losses that could arise from trading in derivatives while selling them to small and medium Spanish companies. Following the news, DBK shares fell 4.3% on January 11.
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Deutsche Bank is a multinational investment bank and financial services company. The DAX 40-listed bank operates across Europe, the U.S., and Asia. DBK shares have gained 19.7% in the past year.
Further Details about CNMV’s Probe
The CNMV has opened disciplinary actions against Deutsche Bank’s Spanish arm, citing two “very serious infringements.” The probe involves the sale of currency-based derivatives between 2018 and 2021. As per a Reuters report, one violation involves breaching transparency obligations and the responsibility of disclosing facts to the clients. The second violation involves not acting in the best interest of clients within the scope of structured OTC (over-the-counter) currency derivatives.
Deutsche Bank undertook an internal investigation on the said matter last year. Deutsche Bank’s investigation also led to a similar conclusion, leading to the firing of the concerned officers. Deutsche Bank also had to shell out tens of millions of euros to settle the cases during the internal probe.
Importantly, the extent and impact of Deutsche Bank’s penalty from the CNMV probe remains unclear at the time. The penalty could range from 5 million euros to up to 10% of the annual turnover of the local subsidiary. CNMV has emphasized that banks must always act in the best interest of clients and sell products that suit their risk/reward profile rather than further their own interests. Having said that, the CNMV’s probe does not imply that Deutsche Bank is guilty.
Is Deutsche Bank a Buy or Sell?
Analysts remain split on Deutsche Bank’s stock trajectory. Yesterday, Morgan Stanley analyst Giulia Miotto maintained a Hold rating on DBK stock while lifting the price target to €16.00 (31.7% upside) from €15.00.
At the same time, RBC Capital analyst Gerard Cassidy reiterated a Buy rating and price target of €16.00 on DBK stock.
Overall, with eight Buys, three Holds, and two Sell ratings, DBK stock has a Moderate Buy consensus rating on TipRanks. The Deutsche Bank AG share price forecast of €14.97 implies 23.2% upside potential from current levels.
