£2.8bn writedowns by German banks

Two of London's largest German-owned investment banks today announced writedowns totalling €3.6 billion (£2.8 billion) as the credit crunch tightened even more severely in the first three months of the year.

Deutsche Bank raised its writedowns to €2.7 billion from a forecast €2.5 billion at the start of the month. Most of the losses were on leveraged loans, commercial property and mortgage-backed securities.

German insurer Allianz expects its banking offshoot Dresdner, which includes Dresdner Kleinwort, to write down €900 million in the first quarter.

Some recent indicators are encouraging, Deutsche chairman Josef Ackermann said. "In April, financial markets have shown signs of stabilising, and valuations of some asset classes are attracting growing interest from investors."

However, he also warned that "the near-time outlook is highly uncertain", with both credit and liquidity remaining very tight. "Investors continue to be cautious," Ackermann added. "The US housing market is still weak, and inflationary pressures have intensified."

Deutsche swung from a first-quarter profit of €3.16 billion in 2007 to a loss of €254 million this year.