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January 8, 2018

Deutsche Bank expects US tax reform to dent 2017 profit by €1.5bn

Deutsche Bank has said that it will book a non-cash tax charge of about €1.5bn in its fourth quarter following a tax overhaul in the US.

The recent decision by the US government to slash federal tax rate to 21% from 35% reduces the value of the German banking giant’s deferred tax assets.

The group expects the charge to result in a small full-year after-tax loss and lower its common equity tier 1 ratio by nearly 10 basis points.

However, its ability to make scheduled payments on additional tier-1 securities will remain unaffected by the decision, the German lender said.

The bank also expects to post positive full year income before income tax (IBIT). However, it warned of a negative IBIT for the fourth quarter owing to restructuring and litigation expenses of around €500m during the period.

“This reflects the weak revenue environment, elevated adjusted costs [1] currently anticipated to be broadly in line with the prior year period, and a loss on sale from the recently announced disposal of the Polish Private & Commercial Bank business,” the bank said.

The bank also said that trading conditions in the final quarter of 2017 were marked by low volatility in financial markets.

“Combined fourth quarter 2017 Fixed Income (FIC) Sales & Trading, Equity Sales & Trading and Financing revenues are expected to be approximately 22% below the prior year period, excluding the impact of Debt Valuation Adjustments in both periods,” the bank noted.

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