Deutsche stays in black despite further GBP 1.8bn

Deutsche Bank has written off a further EUR 2.3bn (GBP 1.8bn) to take its total credit crunch bill to more than GBP 5bn – one of the largest reported by any European bank.

Germany’s biggest bank was forced to admit to further losses caused by investments in mortgage-backed securities, commercial property loans and the monoline insurers that support bond issuers.

The write-downs drove its second-quarter earnings down to EUR 642m compared with EUR 1.8bn in the same period last year. There was some relief that the bank had managed to stay in the black after reporting a first-quarter loss.

This helped prompt speculation that Deutsche may be interested in bidding for Postbank, the retail banking division of Deutsche Post.

The losses also prompted discussions about whether Deutsche is too reliant on investment banking, which contributes about a third of its pre-tax profit.

The pain felt by Deutsche from the seizing up of financial markets has not been as great as that reported by UBS, which has recorded about GBP 19bn of write-downs. Wall Street firms have been hit harder. Merrill Lynch is trying to shore up a balance sheet dented by GBP 26bn of write-downs.

Deutsche may manage to avoid raising capital as the bank’s tier one capital ratio, used to measures its financial strength, is 9.3 pct. Its target is 8-9 pct.

Deutsche Bank has written off a further EUR 2.3bn (GBP 1.8bn) to take its total credit crunch bill to more than GBP 5bn – one of the largest reported by any European bank.

Germany’s biggest bank was forced to admit to further losses caused by investments in mortgage-backed securities, commercial property loans and the monoline insurers that support bond issuers.

The write-downs drove its second-quarter earnings down to EUR 642m compared with EUR 1.8bn in the same period last year. There was some relief that the bank had managed to stay in the black after reporting a first-quarter loss.

“We remain cautious for the remainder of 2008,” said Josef Ackermann, Deutsche’s chief executive. “We will continue to strictly manage cost, risk and capital and to reduce our exposures in key areas. We will continue to invest in all our core businesses, both organically and by acquisition, but we will not relax our discipline.”

This helped prompt speculation that Deutsche may be interested in bidding for Postbank, the retail banking division of Deutsche Post.

The losses also prompted discussions about whether Deutsche is too reliant on investment banking, which contributes about a third of its pre-tax profit.

The pain felt by Deutsche from the seizing up of financial markets has not been as great as that reported by UBS, which has recorded about GBP 19bn of write-downs. Wall Street firms have been hit harder. Merrill Lynch is trying to shore up a balance sheet dented by GBP 26bn of write-downs.

Deutsche may manage to avoid raising capital as the bank’s tier one capital ratio, used to measures its financial strength, is 9.3 pct. Its target is 8-9 pct.