( Reuters ) - Deutsche Bank's profit could be hit by up to 1.7 billion euros ($2.4 billion) due to loans that have dwindled in value as a result of the credit market crisis, sources familiar with the situation said.
Chief Executive Josef Ackermann last week acknowledged the bank was heading for a rocky third quarter, flagging an upcoming revaluation of 29 billion euros of credit it had promised to clients.
Deutsche would normally farm these loans out to other banks, but it has become harder to sell on such debt in the wake of a credit squeeze that began with a wave of mortgage defaults in the U.S., and the bank now faces having to write down the value of these loans to reflect this.
One source familiar with the situation said the bank estimates that the credit is now worth between 4 and 6 percent less than face value.
That would hit profit by up to 1.7 billion euros booked in the third quarter. In the same period a year ago, Deutsche made a net profit of 1.2 billion.
Deutsche, one of the world's biggest M& A banks, is now trying to get clients to renegotiate credit terms or drop deals to shrink the size of the fallout. The loss could also shrink if credit market conditions improve.
The bank declined to comment.
At 8:06 a.m. EDT Deutsche Bank's shares were down 2.1 percent at 89.91 euros, underperforming the DJ Stoxx European banking sector index and Germany's blue-chip DAX index.