Deutsche Bank has made an announcement that it would see a record loss of more than €6 billion (£4.4 billion) in the third quarter.
The warning came late Wednesday night (October 7th) and shocked analysts, as forecasts had been for profits of around €1 billion.
According to the bank, impairment charges of €5.8 billion were the reason for the huge losses. It says these charges are related to higher capital requirements for Deutsche's investment bank and reduced value of the company's retail banking division, Postbank, which is up for sale.
In addition, Deutsche saw a €600 million writedown on the value of its 20 per cent stake in Chinese Hua Xia Bank. The stake was purchased in 2005 and is currently worth around $3.5 billion.
Another €1.2 billion has also been set aside to cover litigation costs – the bank has been caught up in the Libor-rigging scandal and may also be involved in Swiss investigations over suspected price-fixing in the precious metal market.
Dividends could be scrapped
Deutsche Bank has said that it may reduce or completely scrap dividend payments for shareholders this year.
However, some experts remain optimistic about the bank's financial outlook. Analysts Daniele Brupbacher and Mate Nemes told the Guardian that the bank's recent 'clean-up' was hiding some of the firm's good results.
"The goodwill impairment charges are paving the way for streamlining the bank's business portfolio and part of strategy 2020," they explained.
The bank's new chief executive John Cryan took over in July. Last month, it was reported that he was preparing to cut about 23,000 jobs – about a quarter of the workforce – in an attempt to reduce costs.
Bankers’ bonuses could also be cut. Mr Cryan told staff in a memo: "While compensation considerations are not based on this year's financial results alone, our shareholders will rightly expect employees to share something of the burden."
At midday in Frankfurt, share prices for Deutsche Bank were at 25.58 points. It will publish its full third-quarter results on October 29th.