Analysts are concentrating on Deutsche Bank’s liquidity, capital and litigation issues ahead of the troubled lender's third quarter results on Thursday.

Germany's largest bank has been hit by unprecedented sell-offs, losing over half of its stock market value in just a year.

The firm has also announced massive job cuts ahead of a $14bn fine from the US Justice Department around its former sales practices regarding mortgage-backed securities.

UBS equity analyst Daniele Brupbacher forecasts a third quarter net loss of €611m ($666m) for Deutsche Bank, in-line with consensus.

Brupbacher also expects 12% and 5% year-and-year declines for the firm’s FICC and Equities divisions.

“We believe Deutsche will be able to over time improve its low or even negative current return on tangible equity (ROTE) levels,” the analyst wrote on Wednesday.

“The improvement will mainly come from cost reduction, in our view, while Deutsche will try to defend its revenue base.”

Jernej Omahen, analyst at Goldman Sachs, expects Deutsche Bank’s operating profits will yet again be consumed by litigation and restructuring charges.

“The focus will be on litigation, capital, liquidity- and only then, operating trends," wrote Omahen.

“Market concern surrounding DB’s litigation is such that we expect the bank to depart from industry practice of “no comment” and provide a detailed update,” he added.

“Were DB to provide no guidance, the market would move to assume a worst case outcome, in our view.”

Omahan also said that Deutsche Bank is thinly capitalised.  

"We estimated Deutsche Bank’s capital shortfall at €6.7bn, on the back of the EBA’s stress-test results.

"This – basing the capital shortfall on the EBA’s test results – remains our primary approach to analysing the potential for future capital need."

Liquidity

At end of the second quarter, Deutsche's liquidity reserve stood at €223bn or 20% of its total assets.

The firm’s high-quality liquid assets (or HQLA) balance stood at €196bn (16% of assets), leading to a liquidity coverage ratio (“LCR”) of 124%.

“Change in liquidity reserve will be closely watched but unlikely to have been abrupt, in our view,” added Goldman’s Omahen.

“A meaningful reduction in customer deposits, and change in liquidity reserve, would obviously be taken negatively.”