From the WSJ:
"FRANKFURT -- Deutsche Bank AG Wednesday said it will take charges of up to 2.2 billion euros ($3.09 billion) for the third quarter on leveraged loans, structured credit products and mortgage-backed securities, although it will still achieve a sizable net profit due to one-time gains.
The German banking giant said the charge on leveraged loans and loan commitments will be up to €700 million, in addition to charges taken on such loans and commitments during the second quarter. It will also take approximately €1.5 billion in charges on structured credit products, residential mortgage-backed securities and valuation losses on both debt and equities.
It said its Corporate Banking & Securities unit is likely to report a pretax loss in the quarter between €250 million and €350 million. Still, overall net profit is expected to exceed €1.4 billion, up from €1.24 billion a year earlier, due to tax credits and other gains, such as on the sale of its New York City property. The bank also reaffirmed its financial targets for 2008.
"We see substantial opportunities in investment banking after this period of correction. Therefore, we stay the course and remain committed to our publicly-stated financial targets for 2008, including pretax profits of €8.4 billion, assuming normally functioning markets," Chief Executive Josef Ackermann said in a statement.
Ahead of the statement, Deutsche Bank's shares were trading flat to lower. Recently they were trading 1.5% higher at €94.89.
--Ragnhild Kjetland of Dow Jones Newswires contributed to this article
Now, if there operating profit is negative this quarter, primarily due to mortgage backed securities and assumably mortgage related structured credit products, and the accounting profit is due solely to one time gains, what makes management think they will have a profitable quarter going forward? After all, the mortgage morass is just getting started. We are just entering the real estate bubble bust, and adjustable rate mortgages from the height of the boom are just starting to reset. Odds are this is going to get much worse next quarter, not better. That is probably why the caveat/disclaimer as thrown in there, "assuming normally functioning markets". The issue is, markets are functioning normally. They are marking to market the junk that was previously underwritten as investment grade paper, now known as poorly underwritten toxic waste.