Oppenheimer’s star banking analyst Meredith Whitney slammed the banking giants yet again this morning. The difference between today’s note and her prior criticisms, is that now she expects that many banks will need to raise additional capital in 2009. She sees additional loss provisions at Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), JPMorgan Chase (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), and at other banks in her universe.
Yep, Meredith Whitney is putting banks back on the stretching rack and into the Iron Maiden.
JPMorgan Chase (NYSE: JPM) is the bank which Whitney sees to have thelargest increase in fourth-quarter 2008 loss provisions. She is expecting losses of $6.2 billion for the quarter. Bank ofAmerica’s (NYSE: BAC) loss provision may roughly double to$6.7 billion. She sees Citigroup (NYSE: C) reporting a $7.9billion provision.
Maybe this is good news in the "Panglossian" sense for Wells Fargo& Co. (NYSE: WFC), where she sees a "mere" $4.4 billion provision.That is odd considering the Wachovia closure, although that technicallydoesn’t integrate until the first quarter.
She sees additional credit-rating downgrades on mortgage securitiesthat will ultimately lead to further stresses on the available capitaland reserves at many of the key banks. While some hope forimprovements, Whitney noted that the pace of downgrades onlyaccelerated through the end of 2008. She noted that capital ratioswill be "meaningfully lower" in the quarter versus pro-forma levels ona post-TARP infusion basis. From the group of banks in here universe,she already sees $40 billion in writedowns from last quarter.
There is the notion that we at 24/7 Wall St. want to keep yousteady on. While many companies lie or stretch things on the upside,all of the major companies and banking institutions have told you toprepare for 2009 to be a very rough year.
JPMorgan’s star CEO JamieDimon said in an interview things were horriblecand that his bank saw losses continuing. B of A’s Ken Lewis has said that he expects 2009 to be a very tough year and that no realrecovery is likely until into 2010. Look at all of the layoffannouncements coming from companies. They don’t fire workers justbecause they see the weakness of the last two quarters going foranother quarter or two. They get rid of workers when they expect business to stay weak for quite some time.
Morale no longer matters. The beatings continue.
Jon C. Ogg
January 7, 2009