Deutsche Bank Expects Loss After US Tax Law

Germany’s biggest lender is expecting to report a full-year after-tax loss for 2017, largely owing to changes in the US tax system. The bank said it also suffered from low levels of client activity last year.

Deutsche Bank said it would need to report a “small full-year loss after tax for 2017,” largely because of changes in the US tax system passed last year, DW reported.

“As a result of the recent enactment of the Tax Cuts and Jobs Act, Deutsche Bank expects to recognize an approximate €1.5-billion ($1.8-billion) non-cash tax charge for the fourth quarter,” the group said in a statement.

The report, which wiped 4% off Deutsche’s shares in late trading Friday, came hours after Morgan Stanley joined a chorus of companies detailing one-off hits from the US tax reforms. Bank of America and Citibank have voiced similar concerns.

While the US tax reform slashes the tax rate from 35% to 21% for companies, Deutsche Bank and other firms are no longer able to set their previous losses against tax to the extent they were able to do before the new legislation went into effect. But looking to the future, Deutsche noted that the recent changes would reduce its average effective tax rate worldwide to around 30% from January 1, 2018.

The German lender has been struggling to return to profitability amid a massive restructuring and a backlog of legal cases.

As well as the immediate impact of the US tax changes, Deutsche Bank highlighted that “trading conditions in the fourth quarter of 2017 were characterized by low volatility in financial markets and low levels of client activity.”