LONDON/FRANKFURT -- Britain's biggest mortgage lender begged for new funding on Tuesday and Germany's top bank suffered its first quarterly loss in years as the credit crunch sapped financial industry strength.
UK-based HBOS asked shareholders for 4 billion pounds ($7.9 billion) via a rights issue and said it would cut its dividend payout as it grapples with toxic assets and a deteriorating home loans market.
Deutsche Bank wrote down 2.7 billion euros ($4.2 billion) as its contribution to the burgeoning pile of global property-based asset mark-downs, and abandoned its 2008 profits target. Europe's biggest insurer Allianz also wrote down 900 million euros.
HBOS, which owns Britain's mortgage market leader, The Halifax, is the second major UK bank in days to turn to investors. Royal Bank of Scotland announced plans last week for a record 12 billion pound cash call. Analysts say the HBOS move could pressure others to follow suit.
Most worryingly for investors, the Deutsche results, the German bank's worst since the collapse of the dotcom bubble, showed signs of broader problems.
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Revenue at Deutsche's investment bank arm slumped to 880 million euros in the first quarter from 6.1 billion a year ago.
"The issue is not the writedowns," said Dieter Ewald, a fund manager with Frankfurt Trust. "What is worrying for me is the impact on the operating business -- that's decisive."
HBOS too said in its trading statement that UK market conditions remained challenging and that it expected a deterioration of the credit environment in 2008.
The British bank said its bolstered balance sheet prepared it for a further worsening in the macroeconomic environment but also to grow in residential mortgages and savings, and abroad.
"We've taken the firm view that for the next four to five years, given the more uncertain macroeconomic environment, we want to have an even higher target ratio," Chief Executive Andy Hornby told Reuters in a telephone interview on Tuesday.
Most concern at HBOS centered on the deteriorating value of below-prime Alt-A mortgages, and the bank said the portfolio was now being marked at 80p to the pound, still modest compared with 50 percent writedowns at RBS.
The bank's results came as March figures from the Bank of England showed the lowest level of monthly mortgage approvals since the central bank began measuring them in 1999, evidence that a housing downturn in the UK is gathering pace.
Spain's largest bank, Santander bucked the gloomy trend, reporting 22 percent profit growth in the first quarter, helped by its new ABN acquisition in Brazil.
Spanish banks have largely escaped the credit woes battering global rivals because Spanish regulation prevented them from holding riskier assets.
Nevertheless, Santander investors were not celebrating as they focused on the still-bleak outlook for financials.
The Spanish economy and property sector are now slowing, consumer spending is waning, lending growth is tumbling from rates of over 20 percent and bad loans are climbing.
Santander shares were down 0.2 percent at 13.53 in morning trading as the DJ Stoxx index of European banking stocks fell 0.3 percent. The index has lost about a third of its value in the past year.
Shares in HBOS fell 0.5 percent and Deutsche Bank shares were down 0.8 percent at 76.16 euros.
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