Credit Suisse Predicts Deutsche Bank Will Have More Writedowns in H208

Photo by Bloomberg

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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TransCanada(TRP)'s Natural Gas Pipeline was Approved by the Lawmakers

According to Reuters on August 1, TransCanada plans to build a 1,700-mile line to an existing pipeline hub in Canada that would send about 4 billion cubic feet of Alaska natural gas a day to domestic markets. The license does not guarantee construction, but it means TransCanada must move forward on federal permitting applications for the 1,700-mile (2,735-kilometer) pipeline. It's estimated to cost between $26 billion and $30 billion.

The approval comes with up to $500 million in state seed money. It also sets up a race with a competing pipeline venture established by oil giants BP PLC and ConocoPhillips.
TransCanada has estimated that the project will cost $26 billion, while consultants hired by the state put the estimate at $31 billion. Under TransCanada's plan, the pipeline would start shipping natural gas in 2018. If sufficient firm contracts are secured in the open season, TransCanada would begin construction after regulatory approvals are received. TransCanada is targeting to have the pipeline in service by September 2018.

While the Canadian Press wrote on August 3, that but analysts are wondering whether both companies' megaprojects can come to fruition. "They certainly can co-exist if there is a need for both of them," said Desjardins Securities analyst Daniel Shteyn. "The multi-billion dollar question is if there's a need for both of them."

TransCanada, known more as a shipper of natural gas than of heavy oil, is the apparent victor in the race to the Gulf, after securing enough shipping commitments to go ahead with a massive expansion to its Keystone pipeline, a joint venture with U.S. heavyweight ConocoPhillips (COP).
The further question is whether there will be sufficient supply from the oilsands to feed all the new pipeline projects.

A Canadian Association of Petroleum Producers report in June said output from the oilsands by 2020 would be about 200,000 barrels lower than the previous forecasts because of higher capital costs, labour constraints and environmental regulations.


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Keystone Pipeline Project Makes COP, TRP, and VLO Become Attractive Stocks

Please Note!
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You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.