FRANKFURT: Germany's biggest bank, Deutsche Bank, said on Tuesday its profits soared by 68 percent in the second quarter as financial markets around the world showed tentative signs of stabilising.

The bank posted net profit of 1.1 billion euros (1.6 billion dollars) in the period April to June, driven mainly by the strong performance of its investment-banking wing, where revenues jumped 84 percent.

But while profits were better than analysts had expected, the bank's share price dropped sharply on the German market with the stock down around seven percent at 0940 GMT.

Investors took fright at the company's decision to increase its provisions against bad loans to one billion euros from 135 million euros in 2008 due to the still negative situation in the broader economy.

Analysts at Germany's LBBW bank deemed the increase in the provision "extremely negative" and said the rise in profits was not sustainable in the future.

Despite the market reaction, Chief Executive Josef Ackermann was largely upbeat about what he termed "very satisfactory results" and the bank's prospects.

In a statement accompanying the results, Ackermann said conditions were still too choppy to offer projections for the whole year but the bank was in a strong position.

"The outlook for the remainder of 2009 is strongly influenced by progress in the global economy. In an uncertain environment, Deutsche Bank is well prepared," Ackermann said.

"We have witnessed stabilisation of the world's banking industry and financial markets. Increased liquidity and lower volatility in financial markets are both supportive for our business."

The strong results for Deutsche Bank follow improvements elsewhere in the banking industry, suggesting that the financial sector could be recovering from its worst crisis since the 1930s.

Swiss banking giant Credit Suisse last week reported a 29-percent jump in profits while Sweden's Handelsbanken posted a second consecutive quarterly rise.

Earlier in July, US bank Citigroup posted a 4.3-billion-dollar second quarter profit, rebounding from a 2.49-billion-dollar loss in the same period a year ago thanks to a major one-time gain on a joint brokerage venture.

Ackermann pledged that Deutsche Bank would do all it could to extend loans to clients to help the economy recover.

"Whilst we continue to maintain strict balance sheet discipline, we also remain committed to supporting customers in a difficult credit environment," the chief executive said.

In another sign of the bank's relatively strong position, it said its capital adequacy ratio -- a key indicator of a bank's health -- rose to 11 percent in the second quarter from 10.2 percent the previous quarter.

However, the bank remains burdened by so-called "level-three assets", which are holdings that cannot be valued at present. There are still 64 billion euros of these assets on Deutsche Bank's books.

Nevertheless, Ackermann said the bank was poised to take advantage of the economic turnaround slowly emerging.

"Our strategic focus and proven business model ... and our financial strength, all position us well to take full advantage of opportunities, as and when business conditions improve," he said.