Writedown sends bank into the red

Deutsche Bank AG, Germany's biggest bank, reported its first quarterly loss in five years after writing down the value of loans for leveraged buyouts and asset-backed securities by 2.7 billion euros.

The Frankfurt-based company had a first-quarter net loss of 131 million euros, after earning 2.12 billion euros a year earlier, according to a statement yesterday. Earnings were lifted by 854 million euros from selling stakes in companies and by a tax gain.

Deutsche Bank, led by Chief Executive Officer Josef Ackermann, avoided the worst of the subprime contagion because of early bets against the US housing market. Zurich-based UBS AG, the largest Swiss bank, recorded almost 38 billion Swiss francs ($36.7 billion) of markdowns since July, while Credit Suisse Group last week posted its first loss since 2003 on 5.3 billion francs of writedowns in the first quarter.

"A slowdown at the investment bank was inevitable in current market conditions," Peter Braendle, a fund manager at Swisscanto Asset Management in Zurich, who helps oversee about 63 billion francs, including Deutsche Bank shares, said before earnings. "Deutsche Bank has fared better than its Swiss rivals."

The German bank has declined 13 percent in Frankfurt trading in the last six months, compared with a 20 percent drop in the Bloomberg Europe Banks and Financial Services Index of 59 stocks.

Deutsche Bank wrote down the value of leveraged loans and loan commitments by 1.8 billion euros and of securities backed by residential and commercial mortgages by 885 million euros in the first quarter. The writedowns are net figures after hedges and fees. The company had said on April 1 it would book about 2.5 billion euros in markdowns on top of 2.3 billion euros in 2007.

The bank posted a pretax loss in the quarter of 254 million euros after a 3.2 billion-euro profit a year earlier. It sold shares in companies including Daimler AG, the world's second- biggest manufacturer of luxury cars, Allianz SE, Europe's biggest insurer, and industrial gas maker Linde AG.

Tax gain

The company also booked a tax gain of 113 million euros in the quarter. It paid 1 billion euros a year earlier.

The world's biggest banks and securities firms have reported credit losses and writedowns of about $312 billion linked to the US subprime meltdown, data compiled by Bloomberg show. UBS, Citigroup Inc and Merrill Lynch & Co led banks seeking about $217 billion from investors to replenish capital.

Deutsche Bank said last month its full-year forecast of pretax profit of 8.4 billion euros, which excludes one-time items, was at risk because of further writedowns and declining securities revenue.

The investment-banking unit, which accounted for almost half of last year's earnings, reported a 1.6 billion-euro pretax loss, exceeding the 903 million-euro loss forecast by analysts. The division, run by Anshu Jain and Michael Cohrs, had a 2.2 billion-euro profit a year earlier.

Debt sales and trading revenue declined 61 percent to 1.3 billion euros while equities revenue fell 57 percent to 745 million euros.

Agencies

(China Daily 04/30/2008 page16)