Dresdner posted a third quarter operating loss of DM56.6m, but said it had made provision to protect itself from further financial setbacks.

Exposure to Asian and Russian markets, and the US hedge fund Long Term Capital Management (LTCM), had all compromised the bank's performance.

The collapse of LTCM alone cost Dresdner DM40m.

But the news was not all bad. Shares in Dresdner rallied 2% to DM65.90 as the bank announced its dividend for this year would remain unchanged at DM1.55.

Not alone

Exposure to financial turmoil has undermined bank's profits

Dresdner is not the first bank to stumble as a result of bad loans.

Last week, Deutsche Bank, the largest bank in Germany, reported a third quarter operating profit of Dm70m, down from DM1.26bn in the same period last year.

But analysts are optimistic that Dresdner's fourth quarter results will not be so disastrous as the bank had made huge provisions to safeguard itself from future bad loans.

"Booked all the risks"

"The fourth quarter must be better," said Nathalie Grasegger, a banking analyst at HypoVereinsbank.

"The third quarter results were a bit below market expectations because Dresdner booked all risks in the third quarter," she added.