Deutsche Bank AG, Germany's biggest bank and parent to the former Alex. Brown & Sons, said yesterday that it expects to post a first-quarter loss of $221 million because of stock market losses and write-offs related to its stakes in other companies.
The Frankfurt-based bank said it will be taking net charges in the first quarter of about $800.15 million. Before taxes and partially offsetting gains, the charges were even higher: Deutsche Bank is writing down more than $440 million for securities it had up for sale, another $110 million on private-equity investments and $689.5 million for declines in the value of its stakes in companies such as Gerling, a German insurer, and MG Technologies AG, an engineering company.
The bank said it had an "underlying" pretax profit of $1.05 billion before the charges, which reduced its pretax income to approximately $248.25 million. Since most of the losses are not tax deductible, Deutsche Bank said, the write-offs will leave the company $221 million in the red.
"That's a very, very significant write-down," said one U.S. analyst who has followed Deutsche Bank, but who requested anonymity.
The first quarter will be the third straight for which Deutsche Bank has posted a loss. In the first quarter of 2002, the bank had a profit of $657.8 million.
Deutsche Bank Chief Executive Officer Josef Ackerman is attempting to divest the bank's stakes in other companies - a common practice of non-U.S. financial institutions - as worldwide stock markets have plunged.
"Ackerman is trying to clean up as best he can," Olaf Conrad, who helps oversee $11.8 billion at HSBC Trinkaus, told Bloomberg News. "Wiping up the problems of the past, though, looks like it will stretch into this year."
Deutsche Bank became the owner of Alex. Brown when it purchased Bankers Trust Corp. in 1999. Bankers Trust had purchased Alex. Brown in 1997. At that time, about 1,500 of Alex. Brown's 2,700 employees worked locally. Alex. Brown - once the oldest investment bank in America - was founded in 1808.
Since being acquired, much of Alex. Brown has either been shipped to New York or dismantled through round after round of job cuts. When the last of the most recently announced reductions and relocations are completed, Deutsche Bank will employ about 800 locally, according to the most recent figures available.
The first-quarter write-off of $689.5 million was due mainly to Deutsche Bank writing down the value of its 34.6 percent stake in Gerling, according to Bloomberg. The bank had taken a $772.29 million charge on the same holding last year. The bank bought a 30 percent stake in Gerling in 1991, and has had the insurer on the auction block since 1998, Bloomberg said.
Gerling saw its losses spiral in the aftermath of the Sept. 11, 2001, U.S. terror attacks.
Deutsche Bank expects to report its full results Wednesday.