Deutsche Bank's writedowns swell

FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE) made a further $3.6 billion (1.82 billion pounds) of writedowns in the second quarter, taking its bill from the global financial crisis beyond $11 billion.

Germany's flagship financier had originally been seen as one of the winners in the chaos but as the problems on global markets continue, Deutsche Bank is being sucked ever deeper into trouble.

The group's pretax profit fell in the second quarter to 642 million euros (505 million pounds), it said on Thursday -- a fraction of the 2.7 billion profit it made a year earlier as writedowns ate into profits.

"We remain cautious for the remainder of 2008," Chief Executive Josef Ackermann said in a statement.

Deutsche Bank said it had made 1 billion euros of writedowns in residential mortgage-backed securities and a further 500 million linked to monoline insurers. Commercial real estate investments had cost it 300 million euros in the quarter.

Ackermann said the bank had reduced its leveraged finance exposure by 5.7 billion euros to 24.5 billion, taking advantage of improving market prices, and continued to make progress in early July.

The latest writedowns take Deutsche further up the ranks of banks hurt worst by the crisis, which started with a collapse in risky U.S. home loans last year.

Rival Credit Suisse (CSGN.VX), for example, has had writedowns of roughly $8 billion.

To make matters worse, many investors believe Deutsche is overly reliant on investment banking. Credit Suisse, for example, has a substantial business managing the money of the world's rich that helps counterbalance its exposure to market swings.

This is reflected in Deutsche's share price. It is trading on a price earnings ratio of about 6 -- making it cheaper than its Swiss rival, which is priced above 8 times.