Deutsche writes down 2.7bn euros

Deutsche says current conditions are the worst in recent memory

Deutsche Bank has written down about 2.7bn euros ($4.2bn; £2.11bn) in the first three months of 2008 because of the US mortgage market problems.

Germany's biggest bank also said it had made a pre-tax loss of 254m euros in the first three months of 2008, its first quarterly loss in five years.

Problems were evident elsewhere, and insurer Allianz said it would write off 900m euros at its Dresdner Bank.

And lender IKB made a 965bn euros first half loss, after similar difficulties.

US housing slump

IKB lost heavily on its portfolio investments, many of which were based on securities backed by sub-prime US mortgages.

These were loans made to American borrowers with dubious credit histories, and there has been a high default rate on these sub-prime mortgages since the summer of 2007.

IKB was one of the first German banks to be hit when this sector of the US market collapsed last year, and it has since had to be bailed out by three government loans.

In the month of March, pressure on the banking sector was more intense than at any time since the current credit downturn began Josef Ackermann, Deutsche Bank chief executive

Meanwhile, Allianz had warned in March that the value of bond investments linked to the US housing market - held by its banking unit Dresdner - could be cut further if the US housing slump persisted and investor sentiment remained negative.

It has now said a 900m euros writedown would "have to be accrued in the area of structured financial products of Dresdner Bank due to the ongoing financial market crisis".

The writedown is more than double the 400m euros estimated by Allianz at the beginning of the year.

'Difficult' conditions

At Deutsche Bank, its losses would have been worse had the bank not sold investments in firms such as carmaker Daimler worth 854m euros.

Boss Josef Ackermann said markets were "the most difficult in recent memory".

He added: "In the month of March, pressure on the banking sector was more intense than at any time since the current credit downturn began".

The write-down had been expected to come in at $3.9bn.

In February, Deutsche Bank reported a 48% drop in profit for the last quarter of 2007.

And in October last year, Deutsche Bank revealed a 2.2bn-euro exposure to US sub-prime debt.