Deutsche Bank sees a $2.4 billion hit as IMF warns of further mortgage market turmoilnews
24 September 2007

Mumbai: Deutsche Bank expects its profit to nosedive 1.7 billion euros ($2.4 billion) because of loans that have dwindled in value as a result of the mortgage market crisis, even as the International Monetary Fund (IMF) warned the turmoil would continue with far reaching consequences.

Deutsche Bank chief executive Josef Ackermann last week acknowledged the bank was heading for a rocky third quarter, flagging an upcoming revaluation of 29 billion euros of credit it had promised to clients.

Deutsche normally sells loans to other banks, but this has become difficult in the wake of a credit squeeze that followed a wave of mortgage defaults in the US.

The bank now may have to write down the value of these loans to reflect this. Deutsche estimates that the credit is now worth between 4 and 6 per cent less than face value.

That would hit its third quarter profit by up to 1.7 billion euros compared to the profit booked in the same period a year ago.

Deutsche is now trying to get clients to renegotiate credit terms or drop deals to shrink the size of the fallout. The loss could also shrink if credit market conditions improve.

The bank may be able to use its muscle to renegotiate the terms of the credit, which in turn makes it easier for them to sell to other banks and reduces the need for write-downs.

The IMF, meanwhile, warned the turmoil was set to continue with far reaching economic consequences and more financial firms detailed damage to their loan books.
While Deutsche looked set to lose up to 1.7 billion euros ($2.4 billion) in profits from falls in loan values, Japan''s largest lender, Mitsubishi UFJ Financial Group, said it might have to mark down some of its investments.

Financial markets are betting the US Federal Reserve will have no choice but to cut interest rates again as early as its October 30-31 meeting to curb a housing-led slowdown in the wake of trouble in the risky mortgage sector.

International Monetary Fund Managing Director Rodrigo Rato said the US economy was likely to bear the brunt of the impact of the credit squeeze and that global growth next year was likely to be below 2006 and 2007 levels.

also see : General reports on Banks & Financial Institutions
Other reports on Deutsche Bank

 search domain-b
  go
 
Deutsche Bank sees a $2.4 billion hit as IMF warns of further mortgage market turmoil