European stocks drop following Deutsche Bank results

by Jonathan Adams
European stocks drop

The Stoxx Europe 600 declined 0.4% to 473, while the German DAX and French CAC each dropped nearly 0.2%

European stocks dropped on Wednesday, following the second-highest close ever for the main index, as Deutsche Bank results disappointed, dragging the financial sector down.

The Stoxx Europe 600 declined 0.4% to 473. Of the major regional indexes, the German DAX and French CAC each dropped nearly 0.2%.

Decliners included Novartis, Rio Tinto and Prosus.

The biggest Stoxx 600 gainer was SEB, which rose 13% after well-received results from the French consortium and producer of small appliances. Third-quarter earnings included another lift to fiscal 2021 growth guidance and a rebound for its professional segment, noted a team of Citi analysts led by Edward Maravanyika.

The biggest Stoxx 600 decliner was Kindred Group, which dropped 12%.

Deutsche Bank shares dropped more than 5%. The German banking giant reported third-quarter profit and revenue that beat analysts’ forecasts as gains for its asset-management unit offset lower investment bank revenue and restructuring charges.

The beats by Deutsche were largely due to lower loan losses, noted Citi’s Jason Bazinet and Steven Sheeckutz. 2021 revenues are still expected to be ‘essentially flat’ vs. 2020, consistent with prior guidance and below consensus for a 3% increase, said the pair, in a note.

Also performing poorly was Banco Santander which was down more than 2%. The Spanish banking giant said it would outperform profitability guidance after reporting higher third-quarter earnings, as revenues rose and provisions eased.

Jefferies analysts Benjie Creelan-Sandford and Marco Nicolai said momentum for the bank on net interest income and provisions undershooting should be welcomed, but its weak spots remain higher group costs and provisions for Brazil operations.

On the higher side, Puma shares jumped over 3% after the German sportswear maker reported better-than-expected results, along with a guidance lift for the full year and expected momentum acceleration in EMEA/Americas, noted RBC analyst Piral Dadhania.



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