Deutsche Bank Warns of Full-Year Loss, $1.8 Billion Earnings Hit From US Tax Law

The sweeping tax changes enacted a week ago in the US were ‎expected to ‎mean short-term pain.

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.‎

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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.”‎

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