Deutsche Bank suffered its first quarterly loss in five years on Tuesday as global financial turmoil heaped 2.7 billion euros ($4.2 billion) in writedowns on Germany's biggest listed bank.
Chief Executive Josef Ackermann shied away from restating his annual pretax profit goal of 8.4 billion euros and said last month was the toughest on banks since the global credit crisis began.
A pretax loss of 254 million euros in the first three months compared to a 3 billion pretax profit a year earlier and marked the bank's worst quarter since the collapse of the dot-com bubble.
Deutsche had been seen as one of the winners in the crisis that saw Bear Stearns get taken over and forced Swiss rival UBS and Royal Bank of Scotland to turn to shareholders to raise cash.
But as conditions in global markets worsen, Deutsche Bank is looking increasingly vulnerable as the crisis starts to squeeze its most important businesses such as trading in debt products -- Deutsche's golden goose.
Revenues at Deutsche's investment bank fell to 880 million euros in the first quarter compared to 6.1 billion a year earlier.
"The issue is not the writedowns," said Dieter Ewald, a fund manager with Frankfurt Trust, which owns shares in Deutsche Bank.
"What is worrying for me is the impact on the operating business -- that's decisive."
"Deutsche Bank is dependent on the markets. Are they in a strong position here? I would put a question mark over this."
Deutsche Bank's shares closed 0.4 percent lower at 76.50 euros.
They have fallen about 15 percent so far this year, though have fared better than international peers which are down on average by about 20 percent.
"In the first quarter of this year, the financial market conditions were the most difficult in recent memory," said Deutsche CEO Ackermann.
"In March, pressure on the banking sector was more intense than at any time since the current credit downturn began," he said.
The latest writedowns are equivalent to more than a third of its 2007 net profit and more than all the markdowns it made last year.
The total bill is now 5 billion euros net of fees earned and hedges.
Deutsche is also facing hurdles in leveraged finance and structured credit.
Formerly a big money spinner, this market has ground to a halt as market turmoil spread.
Most of the first-quarter writedowns come from Deutsche's commitments to lend money to customers such as private equity investors and companies carrying out acquisitions.
The bank would normally farm these loans out to other banks, but it has become harder to sell on debt after the credit squeeze which began last year with a wave of U.S. mortgage defaults.
It has to write down the value of these loans to reflect this.
Deutsche said that its exposure to leveraged finance at the end of the first quarter was more than 33 billion euros.
The result in the first quarter would have been worse had the bank not cashed in investments in companies such as carmaker Daimler worth 854 million euros.