Germany’s biggest lender Deutsche Bank AG on Friday said it would report “a small full-year after-tax loss” for last year, largely owing to changes in the US tax system passed last month.
“As a result of the recent enactment of the [US] Tax Cuts and Jobs Act, Deutsche Bank ... expects to recognize an approximate 1.5 billion euro [US$1.8 billion] non-cash tax charge ... for the fourth quarter,” the group said in a statement.
Deutsche therefore “expects to record a small full-year after-tax loss,” it added.
Although the US tax reform slashes the rate from 35 to 21 percent, numerous large firms such as BP PLC and Goldman Sachs Group Inc have reported that it would inflict short-term pain.
A lower tax rate means that tax breaks Washington offered for companies in financial difficulty will be correspondingly smaller.
However, looking to the future, Deutsche said that the changes would reduce its average effective tax rate worldwide to about 30 percent from Monday last week.
The bank, which has struggled to return to profitability as it wrestles with a massive restructuring and a backlog of thousands of legal cases, offered no forecast for its full-year performance when presenting its results for July to September.
It was contrite early last year when it reported a 1.4 billion euro loss for 2016, with chief executive John Cryan asking investors for patience as his painful medicine works through the system.
As well as the effects of the US tax changes, Deutsche said that “trading conditions in the fourth quarter 2017 were characterized by low volatility in financial markets and low levels of client activity.”
Its bond and equity trading and financing divisions expect to report a 22 percent drop in revenues between October and last month compared with 2016’s figure, it added.
The fourth quarter also brought about 500 million euros in “restructuring and severance costs and litigation charges,” including a loss it made on the sale of its Polish unit, it said.
Shares in Deutsche Bank plunged following the announcement, losing more than 5 percent to trade at about 15.51 euros in Frankfurt — making it the worst performer on the DAX index of blue-chip German stocks.
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