Deutsche Bank just announced a massive write-down, and the stock is getting crushed

Deutsche Bank co-CEO John Cryan.
REUTERS/Christian Hartmann

Deutsche Bank has announced a massive write-down, and the stock was down as much as 7% after hours.

The bank said it expects a third-quarter loss of 6.2 billion euros ($6.96 billion).

The board will recommend a cut to, and a possible elimination of, the dividend for the full year of 2015.

The bulk of the write-down is based on goodwill impairments driven by the effects of regulation on the bank.

There is also a 600 million-euro ($674 million) write-down based on an updated valuation for Hua Xia Bank in China.

Deutsche Bank appointed a new co-CEO, John Cryan, in June.

He replaced then-co-CEO Anshu Jain, who resigned on June 30, and will become the sole CEO when the other co-CEO, Juergen Fitschen, steps down next year.

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Here’s the statement from the bank:

Frankfurt am Main, October 7, 2015 – Deutsche Bank (XETRA: DBKGn.DE/NYSE:DB) expects to incur charges that will materially impact third quarter 2015results:

    An impairment of all goodwill and certain intangibles in CorporateBanking & Securities (CB&S) and Private & Business Clients (PBC) ofapproximately EUR 5.8 billion. This is largely driven by the impact ofexpected higher regulatory capital requirements on the measurement of thevalue of these segments as well as current expectations regarding thedisposal of Post bank.An impairment of the carrying value of Deutsche Bank’s 19.99% stake inHua Xia Bank Co. Ltd. of approximately EUR 0.6 billion. This reflects anupdated valuation triggered by a change of the intent of the holding asDeutsche Bank no longer considers this stake to be strategic.Litigation provisions of approximately EUR 1.2 billion, the majority ofwhich are not expected to be tax deductible. Final litigation provisions inthe quarter may be affected by further events before we finalize and reportthird quarter results.

The impairment of goodwill and intangibles and of the Hua Xia investmentwill have no significant impact on Deutsche Bank’s regulatory capitalratios. Deutsche Bank currently expects to report a fully-loaded CRR/CRD4Common Equity Tier 1 ratio for the third quarter of approximately 11%,which includes the impact of European Banking Authority RegulatoryTechnical Standards (“Prudential Valuation”) that were adopted in thequarter.

Based on these charges, Deutsche Bank expects to report a third quarterincome before income taxes (IBIT) loss of approximately EUR 6.0 billion anda net loss of EUR 6.2 billion. Year-to-date results through the thirdquarter are expected to be an IBIT loss of approximately EUR 3.3 billionand a net loss of EUR 4.8 billion.

Excluding the impact of the impairment of goodwill and intangibles, thethird quarter IBIT loss would be approximately EUR 0.2 billion and the netloss would be approximately EUR 0.4 billion, largely reflecting thelitigation provisions and Hua Xia impairment. On the same basis, DeutscheBank expects to remain profitable year-to-date through the third quarterwith IBIT of approximately EUR 2.5 billion and net income of approximatelyEUR 0.9 billion.

As part of the planning for the implementation of Strategy 2020, theManagement Board will recommend a reduction or possible elimination of theDeutsche Bank common share dividend for the fiscal year of 2015.

All the aforementioned amounts are estimates. The final amounts will bedetermined in the coming weeks and will be disclosed in our announcement ofthird quarter results, together with details of the implementation of Strategy 2020, which is now scheduled to occur on October 29.