The largest German bank, Deutsche Bank, said today that it cut the amount of provisions taken against bad loans almost in half in the third quarter, to €544m.

Deutsche Bank had booked €1 billion in provisions against bad loans in the second quarter of the year. Analysts had expected the sum to come to €689m this time around.

Compared with the third quarter of 2008 however, provisions were more than double the €236m reported by the bank. On a nine-month basis, they came to €2.1 billion, compared with €485m in the same time in 2008.

German banks in general are bracing for losses from bad loans, which has made them wary of expanding credit to businesses and households.

'There are going to be losses on loans. That worries me because these losses will hit an already weakened banking system,' said Andreas Schmitz, president of the German banking federation in an interview today in the German weekly Die Zeit.

Meanwhile, however, Deutsche Bank also confirmed its third-quarter net profit of €1.4 billion, the third consecutive quarter that it has made a profit of more than €1 billion.