Deutsche writes off €2.2bn on credit market turmoil

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The Independent Online

Deutsche Bank yesterday became the latest European victim of the credit crunch when it announced ¿2.2bn (£1.5bn) of losses for the third quarter caused by the market meltdown.

Josef Ackermann, the chief executive of Germany's biggest bank, said Deutsche would take charges of ¿700m for losses on leveraged loans and ¿1.5bn for write-downs on credit products and mortgage-backed securities.

The charges will cause a loss of ¿250m to ¿350m at Deutsche's investment banking business for the third quarter. But the bank said it would still have a pre-tax profit of about ¿1.2bn because of strong performance at its other businesses and a one-off gain on selling its building in New York.

Mr Ackermann said the bank was sticking to its target of making ¿8.4bn in pre-tax profit next year. He said: "Despite a challenging quarter for our investment banking franchise, our 'stable' businesses continue to perform well. We see substantial opportunities in investment banking after this period of correction. Therefore, we stay the course and remain committed to our publicly stated financial targets."

The bank's shares rose for the third day running, leading a rally of European banking stocks, as investors continued to take comfort from banks owning up to their losses from the credit crunch. UBS set the tone on Monday when its new chief executive predicted a loss for the third quarter as Switzerland's biggest bank wrote down £1.7bn and announced 1,500 job cuts. Then the US giant Citigroup said third-quarter profit would fall by about 60 per cent but predicted a return to normality in the fourth quarter.

BNP Paribas said yesterday it had "limited" risk linked to real estate, with about ¿100m of exposure to US sub-prime mortgages. France's biggest bank was one of the first European banks to alert investors to contagion from the US sub-prime mortgage crisis when it revealed problems at three investment funds in August.

The announcements will continue to unnerve investors. The price of inter-bank borrowing in euros for three months stayed at a six-year high yesterday. The rate has gone up partly because of increased concern about rising interest rates and also because of banks hoarding money on continuing concern about the effects of the credit crunch.

In the United States, the investment bank Bear Stearns cut 310 jobs at its mortgage origination business, adding to previous cuts at the division. And Merrill Lynch said it had removed two of the bosses of its fixed income division, which built and traded mortgage-backed debt products, and which is expected to reveal big losses in the next few weeks.

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