Esteemed banking analyst Meredith Whitney just gave a CNBC interview a year after starting that she was starting Meredith Whitney Advisory Group.  She is still very cautious on the banking sector and the prospects for higher earnings, but she did give some specifics on JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC) and Citigroup Inc. (NYSE: C).  While she is not bullish on many banks yet, she does have a “Least Worse” call.

Whitney is currently about 30% under many earnings estimates of other analysts.  This is not just over regulatory reform, but over a lack of comparable earnings.  She thinks reform is definitely coming and that higher capital levels are going to be required.  Simultaneously, she sees big changes coming in proprietary trading and “tougher measures for Wall Street…. no doubt about it.”

Whitney also noted that lending is down and loan demand is down.  As far as share prices, she thinks most banks have another 10% to 15% downside coming to the stocks.  Her “least worse” bank is Bank of America Corporation (NYSE: BAC).  She noted that they have in the money assets, including a large stake in BlackRock, Inc. (NYSE: BLK).

As far as Citigroup Inc. (NYSE: C), Whitney believes that Citi has assets it can sell but they are out of the money assets.  The second half to the end of this year is when she sees some cleaner assets after the values have been written down.

As a word of warning, Whitney did warn about the huge migration into regional banks.  She said that business is not good there either on the core operations of lending.

She has not been known for her positive outlook on banks.  Her whole career was made on calling for the collapse and destruction seen in so many past and existing banks.  This wasn’t any change, other than that her negative-bias seems to be less negative each month.

The beatings will continue until morale improves.

JON C. OGG

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