updated 10/3/2007 12:52:08 PM ET 2007-10-03T16:52:08

Deutsche Bank AG said Wednesday it will write off around $3.12 billion related to the U.S. mortgage morass, but that gains from asset sales and tax credits will still help Germany's biggest bank earn a third-quarter profit of about $1.98 billion.

In the face of the 2.2 billion-euro writedown, the latest to hit major banks in the United States and Europe, Chief Executive Josef Ackermann remained upbeat about the bank's future and the industry.

"Despite a challenging quarter for our investment banking franchise, our 'stable' businesses continue to perform well," Ackermann said in a statement. "We see substantial opportunities in investment banking after this period of correction."

Deutsche Bank said in a statement that it would take a charge of approximately 1.5 billion euros ($2.13 billion) on residential mortgage-backed securities, structured credit products, along with as much as 700 million euros ($991.6 million) on its leveraged loans and loan commitments.

The troubles at the German bank underscore the widespread impact of failed U.S. loans to people with weak credit, also known as subprime mortgages. Similar writedowns are hurting other big banks, including Citigroup and UBS, though analysts believe that investors and not account holders will feel most of the pain.

Still, Deutsche Bank expects third-quarter net profit to hit 1.4 billion euros, higher than a year ago, and reiterated its goal of posting a pretax profit of 8.4 billion euros ($11.9 billion) for 2008.

The bank is scheduled to release its third-quarter results on Oct. 31.

The credit market turmoil began with rising defaults in the United States on subprime mortgages, but spread because banks had repackaged those loans with more reliable ones and sold them to a wide range of investors, including several European banks. Credit dried up in early August, roiling financial markets, as banks became wary of exposure to the risky loans.

On Monday, U.S.-based Citigroup Inc. and Switzerland-based UBS AG warned that they suffered significant loan-related losses in the third quarter, then the latest and biggest banks to reveal huge ill effects from the crisis.

Credit Suisse said the same day that "recent market events" had hurt its investment banking and asset management results, but gave no specific figures. Last week, the bank said it was laying off 150 employees, mainly from its mortgage-backed securities unit, as a result of the crisis. And on Wednesday, Credit Suisse unveiled another 170 job cuts.

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