Deutsche Bank AG, Germany's biggest bank, will write down 2.5 billion euros of loans and asset-backed securities and said markets are deteriorating.

"Conditions have become significantly more challenging during the last few weeks," Deutsche Bank said yesterday in a statement. The Frankfurt-based company's shares, which have declined 17 percent this year, rose on speculation the worst of the losses in the banking industry may almost be over.

Deutsche Bank, which increased earnings in 2007, said a week ago its 2008 pretax profit target is under threat. Chief Executive Officer Josef Ackermann cited "difficult" market and economic conditions.

"The subprime crisis is catching up to Deutsche Bank," said Konrad Becker, a Munich-based analyst at Merck Finck & Co who recommends holding the shares.

"This means that Deutsche Bank is at risk of reporting a first-quarter pretax loss."

Deutsche Bank rose 2.9 percent to 73.81 euros at 1:05 pm in Frankfurt trading. The 60-member Bloomberg Europe Banks and Financial Services Index gained 2.2 percent, cutting this year's decline to 16 percent.

"The immediate stock reaction is hope among investors that we've touched bottom," said Derek Chambers, an analyst at Standard & Poor's Equity Research in London who has a "hold" rating on Deutsche Bank.

"Deutsche Bank shares are reacting more to the general financial sector trend than anything else."

Deutsche Bank said yesterday it will cut the value of leveraged-buyout and commercial real-estate loans and residential mortgage-backed securities in the first quarter.

Markdowns on assets backed by residential mortgages "principally" involve 7.91 billion euros of so-called ALT-A mortgages, which fall between subprime and prime, the bank said.

Agencies

(China Daily 04/02/2008 page17)