US tax law pushes Deutsche into loss for 2017

Germany's biggest lender Deutsche Bank said Friday it would report "a small full-year after-tax loss" for 2017, largely owing to changes in the US tax system passed late last year.

"As a result of the recent enactment of the Tax Cuts and Jobs Act, Deutsche Bank... expects to recognise an approximate 1.5-billion-euro ($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 percent to 21 percent, numerous large firms such as BP and Goldman Sachs have reported that it will inflict short-term pain.

A lower tax rate means that tax breaks Washington offered for companies in financial difficulty will be correspondingly smaller.

But looking to the future, Deutsche noted that the changes would reduce its average effective tax rate worldwide to around 30 percent from January 1.

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 impact of the US tax changes, Deutsche highlighted that "trading conditions in the fourth quarter 2017 were characterised 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 December compared to 2016's figure, it added.

The fourth quarter also brought around 500 million euros in "restructuring and severance costs and litigation charges", including a loss it made on the sale of its Polish unit.

Source: AFP