Deutsche Bank (NYSE:DB) reported on Friday a EUR2.2 billion ($2.7 billion) net loss for the fourth quarter and its third consecutive full-year loss, sending its shares sharply lower.
The bank's full-year 2017 net loss was around EUR500 million. Without a EUR1.4 billion charge tied to the value of deferred tax assets announced in early January, the German lender said it would have recorded 2017 net income of EUR900 million, compared with a prior-year loss of more than EUR1 billion.
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Shares in the lender opened 6% lower Friday morning.
Other banks also have taken big charges stemming from the U.S. tax overhaul adopted in December, though lenders expect the changes to boost profits in the long run.
Deutsche Bank's results showed that it is "firmly on the path to producing growth and higher returns," Chief Executive John Cryan said in a statement, "despite a challenging market environment, low interest rates and further investments in technology and controls."
But Deutsche Bank is again on the defensive. Executives assured analysts on a Friday-morning call that the 2017 results don't reflect hard-won gains in core businesses such as merger advising, or the return of clients spooked by big legal threats Deutsche Bank faced in late 2016. Those clients use Deutsche Bank to trade securities, hedge against interest-rate risks and manage piles of corporate cash.
The lender said net revenue in the quarter declined 19% to EUR5.7 billion, compared with roughly EUR7 billion in the same quarter a year earlier. That decline was worse than analysts' consensus expectations.
Planned sales of businesses contributed to the revenue decline, the bank said. Still, overall quarterly revenue declined 10%, excluding the impact of those actions, showing that Deutsche Bank is still struggling to hold on to fee-generating market share in key areas, including its big trading and investment-banking businesses.
The bank cited low volatility and reduced client activity in the markets as factors in the revenue slide. Fourth-quarter revenue declined 16% overall in the corporate and investment bank. Trading revenue declined 20% to 29% across its equities- and fixed-income trading and trading units.
Fourth-quarter revenue in the asset-management and private and commercial banking units declined 22% and 28%, respectively. Cryan said on a call with analysts that the lender would go forward with its planned partial offering of the asset-management business this year as soon as possible, assuming market conditions remain good.
Deutsche Bank's management board hasn't made a dividend decision for 2017, the finance chief, James von Moltke, told analysts. Executives declined to reveal discussions about a dividend ahead of a March meeting of management and board members. Deutsche Bank suspended its dividend in late 2015 as it sought to conserve cash and dove into its restructuring.
On Friday, Mr. von Moltke acknowledged that fourth-quarter expenses were higher than the bank wanted. Deutsche Bank is under intense pressure to control costs after years of disappointing investors with broken promises.
The German lender warned in early January it expected a small full-year loss after taxes.
Deutsche Bank also warned last month that its fourth-quarter trading revenue declined about 22% overall. Banks broadly suffered trading-revenue slumps in the quarter, so Deutsche Bank wasn't alone, nor was it the worst. But its dependence on fees from trading stocks, bonds and other securities makes its persistent declines in that area particularly painful.
Deutsche Bank continues to struggle to return to growth mode in a prolonged turnaround under Cryan and a senior management team largely put in place in late 2015, after he took over.
Prolonged revenue declines and other setbacks have forced Cryan and Deutsche Bank's supervisory board to face increased speculation about CEO succession planning. Cryan has said he plans to remain CEO through the duration of his contract, which extends to 2020.
Investors are frustrated with profit weakness but give Mr. Cryan credit for progress settling litigation headaches and making tough decisions to exit risky businesses and cut staff.
Pressed about revenue declines Friday morning, Mr. Cryan said Deutsche Bank has gained market share in some securities-trading or other areas even as its revenue has slid. "We've lost revenues, but others have lost more revenues," he told analysts. Banks in general are grappling with smaller overall fee piles clients are paying for trading and investment banking.
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