FRANKFURT (Reuters) - Deutsche Bank AG suffered its first quarterly loss in five years as global financial turmoil heaped more than $4 billion in writedowns on the bank and market ructions put a brake on earnings.
By John O'Donnell
FRANKFURT (Reuters) - Deutsche Bank AG suffered its first quarterly loss in five years as global financial turmoil heaped more than $4 billion in writedowns on the bank and market ructions put a brake on earnings.
The bank said on Tuesday it had slipped to a pretax loss of 254 million euros ($398 million) in the first three months of the year from a 3 billion profit a year earlier, marking its worst quarter since the collapse of the dot-com bubble.
Deutsche had been seen as one of the winners in the crisis that forced Swiss rival UBS and Royal Bank of Scotland to turn to shareholders to raise cash. Even Europe's top insurer Allianz SE has been affected.
!ADVERTISEMENT!But Deutsche Bank is looking increasingly vulnerable as the global crisis squeezes its most important businesses such as trading in debt products.
Revenue at Deutsche's investment bank tumbled to 880 million euros in the first quarter from 6.1 billion a year ago.
In a conference call with analysts, finance chief Antonio di Iorio retreated from the bank's goal of a pretax profit of 8.4 billion euros this year, saying uncertain markets made a forecast impossible.
"The issue is not the writedowns," said Dieter Ewald, a fund manager with Frankfurt Trust, which owns shares in Deutsche Bank. "What is worrying for me is the impact on the operating business -- that's decisive.
"Deutsche Bank is dependent on the markets. Are they in a strong position here? I would put a question mark over this."
Deutsche Bank's shares were down nearly 1 percent at 76.16 euros at 4:57 a.m. EDT (0857 GMT). They have fallen about 15 percent so far this year, though they have fared better than the European sector as a whole which is down by about 20 percent.
INTENSE PRESSURE
Chief Executive Josef Ackermann, who had been one of the most outspoken in his industry at the start of the crisis, has been growing increasingly pessimistic in his recent remarks.
"In the first quarter of this year, the financial market conditions were the most difficult in recent memory," he said in a statement.
"In March, pressure on the banking sector was more intense than at any time since the current credit downturn began."
The latest writedowns are equivalent to more than a third of Deutsche's 2007 net profit and more than all the markdowns it made last year. The total bill is now 5 billion euros although this strips out some fees the bank earned.
Deutsche is facing hurdles in leveraged finance and structured credit. Formerly a big money spinner, this market has ground to a halt as market turmoil spread.
Most of the first-quarter writedowns come from Deutsche's commitments to lend money to customers such as private equity investors and companies carrying out acquisitions.
The bank would normally farm these loans out to other banks, but it has become harder to sell on debt after the credit squeeze which began last year with a wave of U.S. mortgage defaults. It has to write down the value of these loans to reflect this.
Deutsche said its exposure to leveraged finance at the end of the first quarter was more than 33 billion euros. Di Iorio said it had sold some such loans.
The result in the first quarter would have been worse had the bank not cashed in investments in companies such as carmaker Daimler worth 854 million euros.
(Editing by Jason Neely and David Holmes)
