Newspaper article The Evening Standard (London, England)

Deutsche Bank Takes Hit as Credit Blight Spreads; MICKEY CLARK

Newspaper article The Evening Standard (London, England)

Deutsche Bank Takes Hit as Credit Blight Spreads; MICKEY CLARK

Article excerpt


THE cracks in the banking sector have started to spread far and wide inthe wake of the subprime mortgage meltdown in the US.

Today it emerged that Deutsche Bank will have to make write-offs totallinghundreds of millions of pounds in the third quarter. Chief executive officerJosef Ackermann has admitted Germany's biggest bank made mistakes that willforce it to write down the value of leveraged loans totalling $41 billion([pounds sterling]20.4 billion) and scrap plans to hire any new staff. JP Morgan Chase says theFrankfurt-based bank will have to write off about e625 million ([pounds sterling]419 million).

This comes just a day after Morgan Stanley announced a 7% drop in thirdquarterearnings as it wrote off [pounds sterling]490 million of bad and doubtful loans. Earlier in theweek, Lehman Brothers took a $350 million hit on its loan book..

Meanwhile, in London things were going from bad to worse for Northern Rockafter the Bank of England said it would not underwrite new accounts.

Citigroup has slashed its target from 400p to 150p and warns the worst-casescenario could be as low as 6p.

More than 100 million Northern Rock shares changed hands as the price slumped afurther 55p to 202pafter briefly touching a low of 176pleaving private investors, who had been punting on a white knight to emerge,nursing sizable losses. "The message from Threadneedle Street is: you are onyour own," said one dealer.

Other banks were also suffering.

HBOS slumped 32p to 842p despite denying it had gone cap in hand to the Bank ofEngland for emergency funding.

Alliance & Leicester fell 54p to 7611/2p and Bradford & Bingley shed 301/4p at2973/4p.

The fall-out from the worsening credit crunch hung over the rest of the market.Despite another solid performance overnight on Wall Street, the FTSE 100 indexfell 53.6 to 6406.4. Not even news of takeover action at J Sainsbury, up 181/2pat 5721/2p, and the London Stock Exchange, 147p dearer at 1600p, was enough tolift sentiment. …

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