Deutsche Bank sees Q3 pretax loss of 6 bln Euro

Deutsche Bank (DBKGn.DE) is bracing for a record pre-tax loss of 6 billion euros (£4.40 billion) in the third quarter, as new boss John Cryan is drawing a line under his predecessor’s performance.

Separately, TheStreet Ratings team rates DEUTSCHE BANK AG as a Sell with a ratings score of D+.

It turns out that 2015 has not been that great for Deutsche Bank. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more hard for investors to achieve positive results compared to most of the stocks we cover.

Excluding the impact of the impairment of goodwill and intangibles, its IBIT loss would be approximately €200 million and the net loss would be around €400 million.

Cryan, who took control in July with a promise to cut costs, is readying plans to cut roughly 23,000 jobs, or about one quarter of total staff, sources told Reuters last month. On the same basis, DeutscheBank expects to remain profitable year-to-date through the third quarterwith IBIT of approximately Euro 2.5 billion and net income of approximatelyEUR 0.9 billion.

Deutsche Bank says it will post a massive loss in the third quarter largely as a result of writedowns at its investment banking unit. The Frankfurt-based lender is also adding about 1.2 billion euros to its litigation reserves.

Among the charges: An €600M impairment to the carrying value of Deutsche’s 20% stake in Hua Xia Bank, and a €1.2B litigation charge.

While the losses and charges involve litigation expenses, it turns out that things may be so bad that Deutsche Bank’s dividend may be reduced or eliminated for the rest of this year. The bank expected that majority of the amount are not tax deductible. The expected regulatory capital ratio included the impact of European Banking Authority Regulatory Technical Standards (Prudential Valuation) adopted during the period.