Deutsche Bank escapes 'subprime bonfire'

Source: Exec Digital UK

Date :08/02/2008 09:18:35

Deutsche Bank escapes the subprime-related ‘hit-list’ but warned that it could not rule out future write-downs of other loans.

The bank said Thursday that it did not suffer any subprime-related losses in the fourth quarter of 2007, though market turbulence did affect its overall profit.

Pre-tax profits at Germany’s largest bank fell 25 percent to €1.4 billion in the last three months of 2007. The figures benefited from the absence of fresh write-downs on mortgage-related and structured credit securities, which in the third quarter had totalled €1.56 billion.

Write-downs on its leveraged finance portfolio were €44 million, against €603 million in the preceding quarter.

Deutsche Bank did write down $3.1 billion in subprime-related investments in the third quarter, modest compared with the losses reported by Citigroup, UBS and Merrill.

Bad debt

The bank’s accounting had been eagerly awaited by investors, because it is the largest bank in Germany and its chief executive, Josef Ackermann, had been outspoken in calling for European banks to acknowledge their exposure to bad debt and mark down the value of troubled securities.

Despite current economic uncertainty, he said that Deutsche Bank would stick to its goal of a pretax profit of $8.4 billion in 2008.

“When the water is up to your neck, it’s wrong to let your head sag,” Mr. Ackermann said at the bank’s annual news conference.

He also declared the bank’s interest in acquiring Postbank, the German retail bank, which reportedly may soon be put up for sale by its majority shareholder, Deutsche Post.

“We are confident there won’t be major upheavals in the market,” he said. “Right now, there are upheavals.”

February 08, 2008