By Tom Sims
Deutsche Bank will post its third-consecutive annual loss in its 2017 results, defying its chief executive’s expectations of a swing to profit and highlighting the difficulty of overhauling Germany’s largest lender.
The bank warned that weak trading, low client activity and a €1.5bn negative impact from a tax overhaul in the US would result in a “small” loss for the full year.
Chief executive John Cryan has cautioned that the bank’s turnaround would be a long, hard slog but said in July that he expected a return to profit in 2017.
The bank’s announcement took investors by surprise and its shares fell sharply, closing 5.2% down.
“The share price reaction speaks for itself,” said a trader in Frankfurt. “Investors are disappointed.”
In March, Deutsche announced an overhaul that includes integration of its Postbank retail bank with its in-house consumer bank, as well as the partial sale of its asset management business.
The company has struggled to keep revenue from shrinking and experienced a 10% drop in the third quarter. The bank had warned that the fourth quarter could be rough and confirmed that yesterday.
“Trading conditions in the fourth quarter 2017 were characterised by low volatility in financial markets and low levels of client activity in key businesses,” the bank said.
Revenue at Deutsche’s cash-generating bond-trading division is expected to drop 22% in the fourth quarter from a year ago, the bank said.
The bank is due to report fourth-quarter and full-year earnings on February 2.