Deutsche Bank bad loans double

CEO Ackermann expects to cut 14,500 jobs to save 2 billion euros in the next 18 months to return bank to strong profitability

FRANKFURT, Germany (CNN) -- Deutsche Bank, Germany's biggest bank, said on Thursday profit sank after it set aside more money for bad loans associated with a string of bankruptcies.

The bank's net income dived 75 percent to 204 million euros, or 0.32 euros a share in the three months to June 30. In the same second-quarter period last year, the company made a profit of 834 million euros, or 1.33 euros a share.

Deutsche Bank, which has announced plans to axe 14,500 jobs to reduce costs by about 2 billion euros in the next 18 months, was forced to double the amount of money its set aside for bad loans in the second quarter to 588 million euros, compared to 254 million in the same period a year ago.

It had loaned money to failed German construction company Babcock-Borsig and $241 million euros to WorldCom, which filed for bankruptcy protection.

At the pretax level, the company beat analysts' expectations with a hefty one-off gain from the sale of assets. Pretax profit rose 35 percent to 2.22 billion euros, while analysts polled by Reuters forecast a pretax profit of 2.081 billion euros.

Deutsche Bank sold assets worth 1.9 billion euros, including shares in the world's biggest reinsurer Munich Re for about 1.6 billion euros.

But net interest revenue fell 17 percent to 2.3 billion euros from 2.8 billion euros amid continued weakness in global stock markets, and declining demand at its corporate and investment banking division.

"The current market environment is a challenge for all of us,'' Chief Executive Josef Ackermann, who took over from Rolf Breuer more than two months ago, said in a letter to shareholders. "Going forward, we take a cautious view on the world's financial markets and major economies.''

Germany's second-largest bank, HVB Group, posted a second quarter operating loss of 89 million euros last week and described conditions in the sector as among the worst since World War II.

And late on Wednesday, insurer Allianz abandoned its 2002 profit target due to deep losses at its banking unit Dresdner Bank.

Results from the German banking sector underscore their vulnerability to a slump in global markets because of their high costs and exposure to Europe's weakest economy.

Deutsche's stock, which has fallen about 25 percent this year, rose 2.9 percent to 59.80 euros because earnings, before one-time items, rose 19 percent to 913 million euros.