Deutsche Bank writedowns rise

By Aaron Kirchfeld  |   2008-8-1  |     NEWSPAPER EDITION

DEUTSCHE Bank AG yesterday returned a bigger-than-estimated 2.3 billion euros (US$3.6 billion) of debt writedowns in the second quarter, and Chief Executive Officer Josef Ackermann said he "remains cautious" on the rest of the year.

Net income at Germany's largest bank slumped 64 percent to 649 million euros, or 1.27 euros a share, from 1.78 billion euros, or 3.60 euros, a year ago, the company said yesterday. Deutsche Bank rose as much as 1.6 percent in Frankfurt trading yesterday as profit fell less than analysts estimated.

Deutsche Bank's securities unit, Europe's biggest, posted a pretax loss of 311 million euros on markdowns of mortgage securities, loans and debt backed by bond insurers. Writedowns at Deutsche Bank, which skirted the worst of the subprime contagion, have been a fraction of those at UBS AG and Merrill Lynch & Co.

"Compared to the United States banks and UBS, there's a world of difference," said Juergen Meyer, a fund manager at SEB Asset Management. "In the current market, it isn't a given that a bank remains profitable."

Deutsche Bank rose 60 cents, or 1 percent, to 59.43 euros by 1:21pm yesterday in Frankfurt trading, leaving declines this year at 34 percent and valuing the company at 31.5 billion euros. The 71-company Bloomberg Europe Banks and Financial Services Index has fallen 31 percent in 2008.

The company reduced the value of residential mortgage-backed securities, mostly so-called Alt-A mortgages, by 1 billion euros. It reported markdowns of 530 million euros on assets secured by bond insurers and 309 million euros on commercial real estate loans. Loans for leveraged buyouts were written down by 200 million euros, and other investments by 203 million euros. Deutsche Bank's second-quarter markdowns bring its total to about 7.3 billion euros.

The collapse of the US subprime mortgage market has led to US$476 billion of credit losses and writedowns at financial institutions globally, data compiled by Bloomberg News show.

Merrill Lynch said it will sell US$8.55 billion of stock and liquidate US$30.6 billion of bonds at a fifth of their face value to shore up credit ratings imperiled by US$52 billion in mortgage losses. Zurich-based UBS has recorded about US$38 billion of markdowns.