J.P. Morgan Securities forecast global wholesale and investment banks to incur additional pretax writedowns of $17 billion for the rest of 2009 to reach mark-to-market valuations of structured credit assets.
The brokerage said it saw the highest need for further pretax writedowns at Deutsche bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) ($4.9 billion) and Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) ($3 billion).
At this point we believe commercial mortgage-backed securities and monolines to be the asset classes with the highest risk of further markdowns, JP Morgan said in a note to clients.
On the other side of the spectrum, BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) and Credit Suisse Group (CSGN.VX: Quote, Profile, Research, Stock Buzz) are now looking relatively clean with estimated further markdowns of $1.1 billion and $1.2 billion in 2009 respectively, JP Morgan said.
The brokerage said, with net asset value of banks at risk, capital preservation remained the key investment driver in 2009 for the banks.
It said it preferred investment banks relative to traditional credit banks due to cost flexibility portrayed by the investment banks along with their private banking cashflow generation with limited credit risk. (Reporting by Ramya Dilip in Bangalore; Editing by Gopakumar Warrier)