Germany's biggest bank takes 1bn euro hit

Deutsche Bank, Germany's biggest, yesterday warned it is taking more than €1bn (£691m) in charges against the falling value of its investments - pushing it into the red.

The bank, however, said its businesses were performing strongly and it would produce an underlying pre-tax profit of some €950m in the first quarter.

Analysts had been expecting Deutsche to record significant investment writedowns though some were taken by surprise by the size of the hit.

Deutsche said it was taking a €625m writedown against equity investments, mainly related to its 34.5% stake in insurer Gerling, which Deutsche has been trying to sell.

It is also taking a €400m charge against its €5bn in dustrial portfolio, with the largest losses recorded against its stakes in EFG Eurobank, Fiat and MG Technologies. The portfolio includes sizeable stakes in DaimlerChrysler, Allianz and Linde.

Deutsche added that it was taking a further €100m writedown against its private equity investments and a €100m impairment charge following recent changes at its Private Equity fee-based business. However, the bank added the losses were partially offset by a €500m gain from disposals, including its Global Securities Services operation.

The bank, which has its headquarters in Frankfurt, said it was expecting a first-quarter net loss of about €200m.

DaimlerChrysler, in which Deutsche has a 12% holding, warned that the Chrysler business in the US would struggle to meet its operating profit target of $2bn (£1.2bn) this year, though it said its Mercedes business expected to match last year's performance. Adding to the gloom in the automotive sector Volkswagen said first-quarter profits had been hit by the strengthening euro and the cost of new model launches.