Whitney: Banks On Life Support Next 18 Months
Influential bank analyst Meredith Whitney remains bearish about the economy, and her outlook for the banks that “lubricate the economy” is grim.
“The big banks are going to be on life support for at least 18 months, if not 36 months,” Oppenheimer's executive director of equity research told CNBC Wednesday morning. “The big banks will not fail, but the big banks will not grow, in my opinion, for at least another two years.”
She echoed other analysts who see the funds from the TARP program being used to fill holes, and do nothing to stimulate the economy.
“You've had massive asset deflation,” she said. “There's more of this to come.”
An example? The Wednesday morning report that American International Group owes Wall Street investment banks about $10 billion for speculative trades that went bad.
Recent remarks by Whitney have been market-movers.
Earlier this month, shares of Wells Fargo fell 19 percent after she called the company her biggest “sell” recommendation among financials. In the same interview, she also said the credit-card industry may cut two trillion dollars in credit lines over the next 18 months.
And that, she said Wednesday, is the next major trauma in the credit crisis.
“Just over 70 percent of American households have credit cards, but over 90 percent of those households revolve at least one time a year, so they're using it as a cash flow management vehicle,” she explained. “The banks now are starting to cut those lines back. That will impact spending.”
(See Whitney's full interview in the video)