Tax issue pushes Deutsche Bank to third straight annual loss

The towers of the Deutsche Bank, right, are seen in Frankfurt, Germany, Thursday, Feb. 1, 2018. Deutsche Bank will have its annual press conference on Friday. (AP Photo/Michael Probst)
The towers of the Deutsche Bank are seen in Frankfurt, Germany, Thursday, Feb. 1, 2018. Deutsche Bank will have its annual press conference on upcoming Friday. (AP Photo/Michael Probst)
The towers of the Deutsche Bank are seen in Frankfurt, Germany, Thursday, Feb. 1, 2018. Deutsche Bank will have its annual press conference on Friday. (AP Photo/Michael Probst)
FILE - In this Oct. 11, 2016 file photo, the logos are pictured at he headquarters of Deutsche Bank in Frankfurt, Germany. The bank will announce the latest figures on Friday, Feb. 2, 2018. (AP Photo/Michael Probst,file)
FILE - In this Oct. 30, 2014 file picture the Deutsche Bank headquarters are photographed in Frankfurt, Germany. The bank will announce the latest figures Friday, Feb. 2, 2018. (AP Photo/Michael Probst, File)

FRANKFURT, Germany — Deutsche Bank's CEO says Germany's largest financial institution is making progress in its drawn-out effort to cut costs and restore profits — despite posting a third straight annual loss.

John Cryan said Friday that many important steps would take time to show up as improved earnings.

Cryan said it's "always been clear that it would take more than two or three years" to achieve the bank's full potential. He added that "good progress" was being made.

He cited slashing the number of overlapping computer systems, ditching businesses in less-profitable countries, and installing a low-cost culture.

Cryan spoke at a news conference after Deutsche Bank posted a 2017 loss of 497 million euros ($627 million). That would have been a profit of 900 million euros had the bank not have had to adjust deferred tax assets due to recent U.S. corporate tax changes.

The bank said the new tax regime would be positive for its earnings in the future.

Even so, the results sent the bank's shares tumbling 6.2 percent lower on the day to 13.86 euros.

The results showed the bank, a pillar of Germany's economy, still struggling to turn solid profits after years of wrenching restructuring and legal trouble.

Earnings have been eroded by a low interest rate environment that has squeezed interest margins; by charges for past misconduct, including a $7.2 billion settlement with U.S. authorities over complex securities based on house mortgages; and by new regulatory and compliance burdens aimed at stabilizing the banking system after the global financial crisis.

Deutsche Bank has also taken write-downs and losses on businesses and investments that it decided to shed as it refocused its business and reduced risky holdings. The bank has trimmed its workforce and withdrawn from doing business in some countries.

Earnings last year were helped by dwindling expenses for litigation resulting from past misconduct and by lower asset impairments.

The bank's fourth-quarter loss of 2.2 billion euros reflected the tax charge — but also weakness in key businesses such as bond and currency trading, where income fell 29 percent.

Unusually low market volatility during the fourth quarter led to lower client activity and thus less revenue for the bank. Equity sales and trading also fell, by 25 percent year on year.

The bank said it was the most difficult trading environment it had encountered since 2008, when the markets were in the grip of the global financial crisis.

Cryan said that the current zero-interest rate environment — the result of the European Central Bank's stimulus efforts — was hurting earnings. He said if the ECB raised its benchmark by just one percentage point, then the bank would gain 1.4 billion euros in the first year and 1.6 billion in the second without any additional expense. The ECB's main interest rate is currently zero.

ECB officials have pointed out that the stimulus, which involves the purchase of bonds to keep market interest rates low, has actually helped banks by supporting the economic recovery. That reduces the amount of loans that are not repaid by businesses.

Must Read

China ambassador urges Australia against 'bias...

Jun 19, 2018

China's ambassador to Australia says the strained diplomatic relationship between the two countries...

Trudeau declines to meet Trump because of US...

Jun 1, 2018

Canadian Prime Minister Justin Trudeau says he offered to go Washington this week to complete talks...

Trump to find a chilly host in Canada visit amid...

Jun 8, 2018

Trump has angered allies just as he makes first visit as president to Canada for a G-7 summit

Trump throws G-7 into disarray with tweets after...

Jun 10, 2018

Trump throws G-7 summit into disarray, tweets that US is pulling back its endorsement of group's...

The Latest: Trump tweeting about G-7 before Kim...

Jun 11, 2018

President Donald Trump is taking more swipes at Canada and its prime minister over trade issues as...

About Us

Banking Reporter is the largest-circulated online business news in the United States, bringing a whole new genre of business journalism more up close and more incisive.

Contact us: sales[at]bankingreporter.com

Subscribe Now!