Finance giant Deutsche Bank has plunged into the red after fears of a growing number of corporate failures prompted it to raise its bankruptcy provision.

Germany's largest bank dismayed analysts by unveiling a pre-tax loss of 181m euros (£115m; $179m) for the July to September period.

These were extraordinarily difficult times for the banking sector worldwide

Josef Ackermann, Deutsche Bank chairman

The loss, which compared with a 224m euro profit a year before, came as the firm strengthened its safety net against bad debts.

Deutsche Bank said it was raising in its bankruptcy provision from 588m euros to 735m euros largely because of the continuing downturn among telecoms firms, and some German and US exposures.

The bank was a lender to stricken US telecoms firm WorldCom, and to Philipp Holzmann, the German construction giant that went bankrupt earlier this year.

But even trading profits dropped, falling 7% from those achieved the quarter before.

"These were extraordinarily difficult times for the baking sector worldwide," chairman Josef Ackermann said.

"The result is without doubt unsatisfying."

Investor reaction

At Frankfurt's stock exchange, the figures initially sent Deutsche Bank shares down 6%.

But Mr Ackerman's forecast of a "satisfying" full year result prompted a rally in the stock, which stood up 1.8% at 44.21 euros in lunchtime trade.

Shares in German banks suffered early in October as fears grew over the depth of their reserves.

Commerzbank stock hit its lowest level for more than two decades.

Job losses

"The real scare over the German banking sector was earlier this month," said Richard Champion, of Pavilion Asset Management.

"People are prepared to see the glass half full at the moment, rather than half empty."

Friday's results also revealed that Deutsche Bank's operating expenses had fallen to 4.9bn euros, from 6.04bn euros a year before, as the firm implements plans to save 2bn euros a year in costs by the end of next year.

The drive will see the bank cut 14,500 of its 97,000 staff.