Deutsche Bank highlighted the deterioration of financial markets in recent weeks by revealing it would make writedowns of €2.5bn ($3.9bn) in the first quarter.

The writedowns are linked mainly to Deutsche’s €36bn leveraged loan portfolio and are in contrast to the German bank’s mark-to-market losses of less than €50m on leveraged loans during the last three months of 2007. “Conditions have become significantly more challenging during the last few weeks,” the bank said.