Deutsche Bank rivals may not face same woes -analysts

ZURICH (Reuters) - European investment banks may not all suffer the same scale of losses on their leveraged loans that Deutsche Bank (DBKGn.DE) may face if it has to write down their value by 4 to 6 percent, analysts said on Monday.

Deutsche shares fell after sources familiar with the situation told Reuters it could suffer up to 1.7 billion euros ($2.4 billion) in writedowns on its leveraged loan book, raising questions as to whether similar banks could face the same fate.

If the Deutsch writedown is confirmed, it would join the ranks of several Wall Street peers.

Morgan Stanley (MS.N), for example, recorded sales and trading losses of $940 million after marking-to-market loans on its books, while Lehman Brothers LEH.N wrote down some $700 million of residential mortgage positions and loan commitments.

But analysts were reluctant to jump to any conclusions as to the potential losses on loan writedowns that Deutsche's two main European rivals, Credit Suisse (CSGN.VX) and UBS AG (UBSN.VX), might face in the third quarter.

"You're on a hiding to nothing trying to extrapolate unless you know the trading positions of each bank," said an analyst with a British bank who asked not to be identified.

UBS shares closed 0.8 percent lower while Credit Suisse rose 0.2 percent.

As credit markets froze up in recent weeks, banks are having to write down the value of loans that they have been unable to parcel out to investors under a so-called "arrange and distribute" model of spreading around risk.

HEDGING

Credit Suisse, like Deutsche, has been a big player in the leveraged finance boom, which helped fuel record levels of company buyouts by private equity investors.

But analysts say the Swiss bank may have minimized the impact of loan writedowns by carefully hedging its positions.

"Credit Suisse are quite prominent in leveraged finance and so you are likely to see some chunky writedowns, but they have said they have increased the use of hedges," said an analyst at the London office of an investment bank.

Deutsche Bank CEO Joseph Ackermann warned last week that the bank would have a difficult quarter, saying it faced write-downs on $29 billion of credits.

UBS, fearing that the boom in leveraged finance would prove unsustainable, chose to be a smaller player than Deutsche and Credit Suisse under its former chief executive Peter Wuffli, who left the bank abruptly in July.

Investors, however, are bracing for further writedowns at UBS's hedge fund business Dillon Read Capital Management, which UBS said it would be winding up after the unit unveiled big losses in May.

But losses in one area can be compensated for big profits in other businesses.

Goldman Sachs (GS.N) unveiled glittering third quarter results last week despite hefty writedowns of $1.71 billion on leveraged loans earmarked for buyouts.

"Quite often people talk of a loss and it's only a partial number. There may be other books of business where they made a lot," said Stephen Hughes, a fund manager at Clariden Leu in Zurich.