Cazenove sees hedge losses for Credit Suisse Deutsche bank

LONDON (MarketWatch) — Analysts at Cazenove said Thursday that they expect European investment banks including Credit Suisse and Deutsche Bank to incur losses from ineffective hedging strategies in the second quarter. The broker said Credit Suisse could incur a loss of 750 million Swiss francs ($726 million) after it attempted to hedge against losses in its leveraged loan and commercial real estate exposure, and Deutsche Bank could lose 590 million euros ($916 million). The broker said Lehman Brothers and Goldman Sachs both incurred losses from ineffective hedges in the latest quarter, adding that the problem stems from divergent price moves between the underling cash positions and the derivative indices firms tried to use to hedge those positions.
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