Deutsche Bank to post another loss

Third consecutive annual loss for lender as revenue at bondtrading unit seen dropping 22%

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 on Friday that weak trading, low client activity and a €1.5 billion (Dh6.6 billion, $1.8 billion) negative impact from a tax overhaul in the United States would result in a “small” loss for the full year.

CEO John Cryan has cautioned that the bank’s turnaround would be a long, hard slog but said in July he expected a return to profit in 2017.

The bank’s announcement took investors by surprise and its shares fell sharply, closing 5.2 per cent down.

“The share price reaction speaks for itself,” said a trader in Frankfurt. “Investors are disappointed.” In March, Deutsche announced an overhaul that included integrating its Postbank retail bank with its in-house consumer bank, as well as the partial sale of its asset management business.

Shareholders said another loss would add pressure on Cryan, who was appointed in 2015 to steer the bank’s return to profit.

“If the bank performs too poorly compared with its competitors, then one would need to start another debate about the strategy,” Ingo Speich, a fund manager at Union Investment, was quoted as saying by Handelsblatt newspaper.

Speich, whose fund holds Deutsche stock, said management had about two quarters to show they were delivering an improvement.

The company has struggled to keep revenue from shrinking and experienced a 10 per cent drop in the third quarter. The bank had warned that the fourth quarter could be rough and confirmed that view on Friday.

“Trading conditions in the fourth quarter 2017 were characterised by low volatility in financial markets and low levels of client activity in key businesses,” Deutsche Bank said in its statement.

Revenue at Deutsche’s cash-generating bond-trading division was expected to drop 22 per cent 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. It posted a net loss of €1.4 billion in 2016 and €6.8 billion in 2015.

The company has been recovering from multiple legal battles, ranging from its role in the marketing of US mortgage-backed securities to a so-called mirror trading scheme that could be used for money laundering.