March 26 (Bloomberg) -- Deutsche Bank AG, Germany's biggest bank, said the U.S. subprime collapse and slowing economic growth will make it harder to reach a full-year profit goal.

Deutsche Bank fell 1.9 percent in Frankfurt trading after saying possible asset writedowns and a worsening economy would ``adversely affect our ability to achieve our pretax profitability objective.'' The bank aims for pretax earnings of 8.4 billion euros ($13.2 billion), excluding one-time items.

The German bank boosted profit last year after skirting the worst of the U.S. subprime mortgage market meltdown that left UBS AG and Citigroup Inc. with record losses. Deutsche Bank will probably have further writedowns on its 36.2 billion euros in loans for leveraged buyouts because of ``deteriorating'' prices, the company said in its annual report published today.

``I'm not sure people actually expected them to reach the targets after what's happened to the markets,'' said Derek Chambers at Standard & Poor's Equity Research in London, who has a ``hold'' recommendation on the stock. ``The immediate concern is leveraged loan writedowns. Conditions also remain difficult for fixed income, which is a large part of their business.''

Deutsche Bank fell 1.45 euros to 72.05 euros, bringing declines this year to 19 percent and cutting its market value to 38.2 billion euros. The 60-member Bloomberg Europe Banks and Financial Services Index has fallen 18 percent so far this year.

`Challenging' Outlook

``The near-term outlook continues to be very challenging,'' Chief Executive Officer Josef Ackermann said in the report. ``Conditions remain difficult both in financial markets and the wider economy.''

The world's largest banks and securities firms have posted mortgage-related writedowns and credit losses of $208 billion since the beginning of 2007 amid the collapse of the U.S. subprime mortgage market. Deutsche Bank reported 2.3 billion euros in markdowns in 2007 on leveraged loans and asset-backed securities. That compares with about $19 billion at Zurich-based UBS and $22 billion at Citigroup of New York.

Oppenheimer & Co. analyst Meredith Whitney, in a note to investors, quadrupled her first-quarter loss estimate for Citigroup to reflect potential writedowns on leveraged loans and collateralized debt obligations of $13.1 billion.

U.S. consumer confidence fell more than forecast in March and home prices in January dropped by the most on record, providing more evidence of what economists say is almost certainly the second recession of the decade.

Pay Rise

Deutsche Bank may earn 6.77 billion euros before taxes this year, missing its forecast, because of a slowdown in debt markets, according to the median estimate of seven analysts surveyed by Bloomberg.

Ackermann received a 6 percent raise to about 14 million euros last year after full-year profit gained 6.7 percent to 6.47 billion euros, the bank said today. Since taking over in 2002, the 60-year-old has raised profit 16-fold by expanding the securities unit and selling assets.

The German bank aims to reach its 2008 target by expanding consumer banking and money management, helped by the purchase of Norisbank and Berliner Bank for 1.1 billion euros in 2006. Those units may not be able to offset a slowdown in investment banking revenue, particularly leveraged finance and structured credit, should the economy weaken more than expected, the bank said today.

Less Credit

Ackermann said last month that the 2008 profit target could be endangered by a recession in the U.S., a knock-on slowdown in Europe and financial market swings. The bank today reiterated a target of ``double-digit'' growth in earnings per share and pretax return on equity of 25 percent. ROE was 26 percent in 2007.

``Credit, for both individuals and businesses, is likely to be more expensive and less widely available than before the crisis,'' Ackermann wrote in a letter to shareholders. ``On financial markets, conditions for both credit and liquidity are still tight, and investors, both private and institutional, remain wary.''

Deutsche Bank had 1.2 billion euros in net subprime trading investments in the form of CDOs, which repackage bonds into new securities with varying risks, at the end of the year.

The slowdown of the more than $2 trillion CDO market follows record downgrades last year in mortgage-linked securities.

More at Risk

Deutsche Bank said other U.S. residential mortgage gross assets totaled 9.8 billion euros at its trading, origination and securitization businesses. This includes 7.91 billion euros of so- called ALT-A mortgages, which fall between subprime and prime, 216 million euros in subprime and 1.68 billion euros in other residential mortgages. After hedges, the bank has 3.01 billion euros of exposure, it said.

The bank also reported 1.1 billion euros of exposure to bond insurers related to U.S. residential mortgages and an additional 1.2 billion euros from other assets such as commercial mortgages- backed securities and public and municipal debt.

Commercial real estate loans and commitments totaled 17.2 billion euros at the end of 2007, split almost evenly between Europe and North America. The further widening of credit spreads on such loans since December could lead to additional writedowns, the bank said.

``The new risk exposure disclosure is larger than expected,'' particularly ALT-A and commercial mortgages, JPMorgan Chase & Co. analysts including Kian Abouhossein said in a note to clients today. The analysts' estimate for net writedowns of 2.9 billion euros at Deutsche Bank this year is likely to increase by a ``few billions'' based on today's data, the note said.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

Last Updated: March 26, 2008 14:00 EDT