In its annual report released on Wednesday, March 26, Deutsche Bank said its "vision" of profits of 8.4 billion euros ($13.2 billion) this year would be hard to achieve in light of possible further writedowns and slowing global growth triggered by the international credit crunch.

"The near-term outlook continues to be challenging," Deutsche Bank CEO Josef Ackerman wrote in a letter to shareholders. "Conditions remain difficult both in financial markets and the wider economy," he said.

Deutsche said Ackermann earned around 14 million euros in salary and bonuses last year with the bank chalking up a record profit of 6.5 billion euros in 2007.

The bank's 8.4-billion-euro pre-tax earnings target excludes one-off costs and charges.

After taking hold during the second half of last year, the US mortgage market crisis "has persisted into the early months of 2008, and continues to weigh on both financial markets and the wider global economy," Ackerman told the bank's shareholders.

Stricken bank may face audit

Europe has not escaped the credit crunch, which first bit in August when banks worldwide hit the brakes on lending to each other as it emerged that some were dangerously exposed to the US subprime mortgage meltdown.

Germany's main casualty of the subprime crisis, the state-owned IKB bank, faces a possible special audit by the government to find out who is to blame for its losses amounting to millions of euros when its investments in the market for risky US mortgages soured.

IKB became the first victim of the subprime crisis last year and was bailed out twice by shareholders in rescues costing more than six billion euros. German state-owned bank KfW, which is IKB's biggest shareholder with a 38-percent stake, has shouldered the lion's share of the bail-out so far.

The audit, which would be conducted by an independent auditing company, will delay a vote of confidence in the bank's boards.

Split government

A German Finance Ministry spokesman told the Financial Times Deutschland that the ministry saw the audit as a way to show that the IKB's supervisory board had acted correctly.

"Responsibility lies solely with the executive board, which informed people badly," the unnamed spokesman told the paper.

According to news reports, the audit is a compromise between Finance and Economics ministries as they failed to agree on a common strategy. While the Finance Ministry, which has a representative on IKB's board of supervisors, wanted to exonerate the body, the Economics Ministry hesitated to do so.

The bank has already received billions of euros in aid -- much of it taxpayers' money -- to prevent it from collapsing. Some parliamentarians and economics experts have said that IKB should not be given any additional financial help from the state.

"We cannot make life easier for those who have made mistakes. They have to pay for their mistakes," European Central Bank head Jean-Claude Trichet told German public broadcaster ARD on Wednesday.

"Not only because it would be unfair if they got off but also because if they don't pay for the mistakes, they'll make them again."