(Adds more analyst comment, opening share price)
By Michael Steen
FRANKFURT, April 24 (Reuters) - Deutsche Bank AG , Germany's largest bank, warned on Thursday that it would post a first-quarter net loss after taking more than a billion euros in charges for the sinking value of investments.
The news sent its shares lower. The bank still has a vast equity portfolio which is vulnerable to weak stock markets, but analysts welcomed Deutsche's effort to wipe the slate clean, particularly in regard to its stake in insurer Gerling.
"Now, at least, the sword of Damocles hanging over Deutsche has been removed and we can concentrate on their operating business again," said Oliver Flade, an analyst at HVB Group.
The bank said it expected to post a net loss of 200 million euros ($219 million) and a pre-tax profit of 225 million euros when it reports next Wednesday, well below market expectations. It posted net profit of 597 million euros a year ago.
Many analysts had expected the bank to post a healthy profit, and Deutsche Bank said its underlying pre-tax profit, excluding the charges, would be 950 million euros.
"The charges are heavy," said WestLB analyst Georg Kanders, who cut the bank to 'neutral' from 'outperform'. "I did not expect a profit warning at such a high level. However, the operating business seems to have run as well as expected."
The bank detailed charges of 1.25 billion euros, which will be partly offset by a 500 million euros gain from disposals. The charges are mainly due to the dwindling value of Deutsche's 34.5 percent stake in troubled German insurer Gerling.
GERLING BLOW
Deutsche Bank has been desperately trying to sell Gerling but suffered a blow at the beginning of the month when mutual insurer HDI broke off acquisition talks. The fresh writedown implies that the bank now values its stake at around zero.
The bank also wrote down the value of its nine percent stake in German engineering company mg technologies and its two percent stake in Italy's Fiat , and took goodwill charges on private equity investments.
Deutsche Bank shares were trading two percent lower at 47.1 euros by 0746 GMT, underperforming the European bank index which was 0.3 percent lower. The stock has recovered 41 percent since it hit a seven-year low around 33 euros in March.
"The headline figures will be difficult for the market to digest," one German fund manager said. "Although many expected something in this direction, the extent of this will come as a surprise."
Chief Executive Josef Ackermann has been selling off non-core businesses and shareholdings to focus on core operations at the bank, which has been dragged down by depressed stock markets and a crisis among the country's lenders.
A month ago he said the bank had made a good start in 2003, fuelling expectations the bank could pull away from its struggling German peers, who have been hit by investment writedowns and spiking bad loan provisions in a weak economy. (Additional reporting by Hannfried von Hindenburg and Mirko Wollrab)