Market turmoil pushes Deutsche Bank into the red

Deutsche Bank made its first quarterly loss in five years as the cost of the global financial crisis mounted for Germany's biggest bank.
Unveiling further writedowns of 2.7 bln euros, the bank said it had made a pretax loss of 254 mln euros in the first three months of 2008. This compared to a more than 3 bln euro pretax profit a year earlier.

The result would have been worse had the bank not cashed in investments in companies such as carmaker Daimler worth 854 mln euros.
Germany's biggest bank had been seen as one of the winners in the crisis that fatally wounded rival Bear Stearns and toppled other Wall Street titans.

However, as conditions in global markets worsen, it is looking increasingly vulnerable. These losses are the first for the bank since those in the aftermath of the dot-com bubble.
The latest write-downs are equivalent to more than a third of its 2007 net profit and more than all the markdowns it made last year. The total bill is now 5 bln euros net of fees earned and hedges.

Many investors are now worried that market ructions will upset its day-to-day business. This was already evident in the first three months of the year when lower trading in debt products, for example, saw its investment bank's revenues dive to 880 mln euros from 6.1 bln euros in first quarter of 2007.

Deutsche is facing hurdles in, for example, 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 a credit squeeze that began with a wave of U.S. mortgage defaults. It has to write down the value of these loans to reflect this.
Deutsche said that its exposure to leveraged finance at the end of the first quarter was 33.1 bln euros.