Deutsche Bank forecast lower full-year revenues and a $1.8 billion earnings hit in the fourth quarter from the new US tax law, becoming the latest major lender to detail the law’s one-time impact on the valuation of deferred tax assets.
Germany’s biggest bank also said that fourth quarter sales were hit by a drop in capital markets trading and low client activity. Deutsche said that it expects revenues of its operating businesses, including fixed income, currencies, commodities and equity sales and trading, to be lower by 22 percent in 2017 than a year earlier – compared with its previous guidance for a broadly flat outcome.
Analyst estimates suggested that the market had been expecting Deutsche Bank to post quarterly profits of almost €1.3 billion.
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On Friday, reports that the lender was poised to issue a profits warning sent the share price down 5.7 percent. Shares traded in Frankfurt tumbled 5.2% to change hands at €15.60 each, the lowest in two months.
The bank was originally scheduled to report its results in February, but German regulations require that companies report material information that could move the stock price as early as possible.
Like many major banks, the sweeping tax changes enacted a week ago in the US were expected to mean short-term pain. However, for US-based corporations that do business worldwide it would then be translated into a long-term advantage.
Deutsche is embroiled in Libor-rigging scandals and is being investigated by several authorities for suspected price-fixing on the precious metals market.
Deutsche Bank noted in a statement Friday: ”The reduction in the U.S. federal tax rate to 21% is expected to reduce Deutsche Bank Group’s effective tax rate on average to the lower end of its previously communicated 30-35% range, based on the current mix of taxable income. The TCJA also introduced the U.S. Base Erosion and Anti-Abuse Tax (BEAT). While Deutsche Bank will require additional detailed analysis in order to assess its impact, and further interpretive guidance and clarifications are anticipated, Deutsche Bank does not currently anticipate any significant long-term impact from BEAT on its tax rate.”