Apr 2, 2008

Deutsche Bank expects $4B subprime hit

Deutsche Bank expects $4B subprime hit

BERLIN - Deutsche Bank AG said Tuesday that it expects first-quarter write-downs of $4 billion due to "significantly more challenging" market conditions triggered by the U.S. subprime collapse.

Germany's largest bank warned last week that it may have been harder hit by the crisis than it had previously announced, with possible losses in some lending  divisions.

UBS AG said Tuesday it would write down $19 billion and record losses of $12.1 billion. Switzerland's largest bank said it would seek $15.1 billion in new capital and announced the resignation of Chairman Marcel Ospel.

In a statement preceding an address in London by Deutsche Bank Chief Executive Josef Ackermann, the bank acknowledged concrete losses for the first time.

"Conditions have become significantly more challenging during the last few weeks," the bank said. "Reflecting this environment, Deutsche Bank anticipates in the first quarter 2008 markdowns in the region of 2.5 billion euros, related to leveraged loans and loan commitments, commercial real estate and residential mortgage-backed securities."

Despite the write-downs, the bank said it expected to stay on its course and its shares rose 2.8 percent to 73.70 euros ($116.53).


Octavio Marenzi, head of the Paris-based financial consultancy Celent said that although Deutsche Bank's losses were not as bad as those suffered by UBS, they were indicative of the severity of the crisis.

"There is little indication that the credit crisis is over and, as a result, a number of banks will be forced to start liquidating their credit positions, putting even further pressure on the market," Marenzi wrote. "For the rest of 2008, the risks for the banking industry are accumulating, especially for those firms, such as Deutsche Bank, with significant exposure to the U.S. markets."
Frankfurt-based Deutsche Bank reported no subprime-related write-downs in the fourth quarter, but said that they totaled 2.2 billion euros ($3.5 billion) in the third-quarter of 2007.

The bank is to publish its earnings for the first quarter of 2008 on April 29.