Credit Suisse Predicts Deutsche Bank Will Have More Writedowns in H208

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According to ClusterStock.com, after slashed its estimates and price target on Deutsche Bank (DB) from 75 euros to 64 euros, Credit Suisse(CS) predicted DB will have more writedowns in the Second Half of 2008. CS stated:

Deutsche Q2 results came in above our expectations, but we are downgrading FY earnings: The variance from our expectations was a result of somewhat stronger underlying revenues, larger than expected writedowns and lower than expected costs. We believe that costs will rise in the second half and that revenues (particularly in fixed income sales & trading) will tail off. We also suspect that material further writedowns will be necessary in Q3.

Furthermore, CS believes that slightly better-than-expected results in DB's fixed income division were the result of better forex revenue and lower rates, which CS thinks won't sustain results in the future. CS added:

The long term revenue generating power of the fixed income franchise remains unclear: Excluding the effect of markdowns, investment banking revenues were down only 16% from Q2 07 (a record quarter). However we still believe that H1 08 performance across the board in fixed income investment banking has been bo, osted by rates and forex revenues and that the equilibrium level could be as much as 20% lower.

On July 31, Deutsche Bank AG reported a bigger- than-estimated 2.3 billion euros ($3.6 billion) of debt writedowns in the second quarter. Deutsche Bank's second-quarter markdowns bring its total to about 7.3 billion euros ($11.4 billion).

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