JPMs Investment Bank Q3 earnings preview - Fixed Income revenues to decline -16% QoQ in 3Q10E) $DB Underweight

 Investment Bank Q3 earnings preview - from K Abouhossein - Altho$ugh for 3Q10 some sell-side EPS estimates might be too high, more importantly the market perception by investors is in our view too negative, focusing on very poor cash equity volumes, assuming the rest of the business is similar. We disagree with this investor view, over-discounting a poor quarter – hence 3Q could surprise. Segments of OTCproducts are holding up well, such as Mortgages, Rates and macro flow equity derivatives in-line with seasonal movements. In addition, we think the market underestimates equity derivative hedging losses from 2Q turning to hedging gains, more than offsetting low client activity in equity flow related activity. Lastly, we see the potential for high yield business and M&A as a material potential revenue driver in 4Q10.  JPM expects Equities revenues to be up 2% QoQ despite poor cash equity revenue performance, driven by Equity derivatives. They also expect Fixed Income revenues to decline -16% QoQ in 3Q10E.  The stock selection pecking order is for preference of USA Investment Banks offering re-leveraging potential now 1) Goldman Sachs (OW), 2) Morgan Stanley (OW), 3) UBS (OW), 4) Credit Suisse (OW), 5) Barclays (N), 6) Deutsche Bank (UW) (They have been negative on $DB Deutsche Bank for some time now and I think its something that must be looked at with great concern. It would be like Larry Flynt saying he thinks MTV is not appropriate for today's youth for JP Morgan to throw Deutsche Bank under the bus about the hole in its balance sheet).So if I was going to speculate which I love to do I would say this banks starts laying off employees to appease shareholders on the upcoming EPS miss they will deliver