Deutsche Bank announced fresh write-downs yesterday, taking its bill from the global financial crisis beyond $11 billion (Dh40.4bn).
Germany's flagship financier had originally been seen as one of the few to emerge unscathed from the crisis, but as the problems on global markets continue Deutsche Bank is being sucked deeper into trouble. The group's pretax profit collapsed in the second quarter to €642 million (Dh3.67bn) – a fraction of the 2.7bn euros it made a year earlier – as write-downs ate into its bottom line.
Deutsche listed its latest injuries from the global crisis, saying it made €1bn of write-downs in residential mortgage-backed securities and a further €500m linked to monoline insurers, which insure against bond defaults.
Commercial real estate investments cost it €300m.
Its bill from the turmoil, while modest compared to Swiss rival UBS, has overtaken that of its Zurich-based competitor Credit Suisse Group AG, which has made about $8bn of write-downs.
The extra damage in the second quarter, however, had been broadly expected.
"We remain cautious for the remainder of 2008," said Chief Executive Josef Ackermann, who also chairs top global banking group the Institute of International Finance.
His remarks contrast with his bullish statements of the past. As late as last November, Ackermann signalled he saw no further write-downs and stood by his goal of making a pretax profit of €8.4 billion this year, a target that has since been quietly dropped.
So far this year, Deutsche Bank has made roughly €400m.
Konrad Becker, an analyst with Merck Finck, said: "The write-downs are the decisive point and show that the crisis lingers… But the results, if you look at costs and interest income, for example, are better than expected."
Deutsche's wage bill fell by almost one third to almost €2.7bn in the second quarter as bonus payouts fell.
The numbers
642m: euros was the group's pre-tax profit, which was a fraction of the €2.7bn it made a year earlier
2.7bn: euros was Deutsche Bank's wage bill, which fell by almost one-third in the second quarter as bonus payouts declined