JPMorgan Sees Further Big Write-Downs for European Banks - Report

Tom Burroughes

5 June 2008

European banks will likely take further mark-to-market write-downs of €9.5 billion ($14.65 billion) for the rest of the year, according to JP Morgan Securities, which now expects total write-downs for 2007 and 2008 to be higher at about €30.6 billion, according to a report by Reuters.

The brokerage, which previously saw write-downs for 2007 and 2008 totalling €24.9 billion, said the estimate change was mainly due to write-downs on monoline counterparty exposures that have risen by €4.8 billion.

JP Morgan estimates that Germany's Deutsche Bank will need to take additional write-downs of €3.6 billion while Swiss bank Credit Suisse will have to take write-downs of SFr2.1 billion.

The brokerage said Societe Generale, the French bank, will need to take further write-downs of €1.8 billion while another French banking group, Natixis, will need to record write-downs of €1.4 billion more.

JP Morgan, however, said the worst of the markdowns appear to have been taken, adding that capital remained scarce in the banking industry and that it saw ongoing pressure to de-leverage driven by credit investors, rating agencies, and local regulators.

JP Morgan maintained its "neutral" view on the European wholesale and investment banks sector.