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Published: August 21, 2009
Notorious bank analyst Meredith Whitney of
Meredith Whitney Advisory Group is out with some new harsh
predictions calling for the demise of more banks. It is actually
not all really bad news, but she is also arguing that the
earnings power the stocks are starting to reflect is just not
there yet. She even specifically noted Bank of America Corp.
(NYSE: BAC) and Citigroup, Inc. (NYSE: C).
Whitney gave a brief interview to Bloomberg in Jackson Hole and
is essentially calling for more bank failures and more liquidity
to come out of the system. So far there have been 78 bank
closures and Whitney’s firm now projects that there are going to
be more than 300 bank closures and also 5% to 8% of bank
liquidity taken out of the system before this is all done.
The good news is that there are
fewer banks this time than there
were in the last cycle, so Whitney
noted fewer closures. She cited that
there were thousands of closures in
the last cycle.
But in the land of revolving debt,
or credit cards, Whitney noted that
more than $1 trillion of liquidity
is being taken out of that market
now and ultimately that there will
be over $2.5 trillion taken out of
that market when it is all finished.
She thinks that many of the banks
will be okay, but does not expect
consumer spending, the real driver of
the economy,
to come back soon.
As far as Citigroup, Whitney thinks
the company will start to sell
assets and raise capital through
asset dispositions to be able to buy
the government’s stake back. As for
Bank of America, Whitney noted that
it had already monetized a lot of
assets.
-- Jon C. Ogg
Editor
247WallSt.com |
