That woman in top you see is Meredith Whitney, a banking analyst for CIBC World Markets. She is making a name for straight talk amid the credit crisis. In late October of last year, Whitney predicted that Citigroup would have to sell assets or cut its dividend. She also downgraded the stock to essentially a "sell." That report peeled $15 billion off Citi's market value in one day and, some say, helped usher then CEO Chuck Prince into an unceremonious retirement. On Jan. 15, Citi slashed its dividend by 41%. On Feb. 6 she downgraded Goldman Sachs (GS) even though she's a big fan. Whitney was expecting losses in the following week when major European banks report earnings.
Now, Ms. Whitney’s advice is taken much more seriously — which is why you’ll find her most recent predictions in the pages of Business Magazines. She recently spoke with Maria Bartiromo about the bumpy road ahead for banks.
Amid the deepening credit crisis, Citi will not be the only bank cutting dividends on the heels of fourth quarter losses, Ms. Whitney told Ms. Bartiromo.
Wachovia and Bank of America, which recently resorted to another round of capital raises — $3.5 billion and $13 billion, respectively — are especially strong candidates for dividend cuts, she noted. “At certain point people might start to think, well, maybe it will simply be cheaper to cut our dividend,” she said.
If such predictions prove correct, Wachovia and Bank of America shareholders will hardly be alone in their misery, Ms. Whitney added. “You can’t take anyone off the table because the loss curves have accelerated at such a pace from the third quarter to the fourth quarter that people’s earning are going to be in jeopardy this year.”
Ms. Whitney also explained her recent downgrade of Goldman Sachs, which until now was a star performer among banks weathering the credit crisis.
“[Goldman shares are] going to probably do mid-teens [return on equity], and so the comedown is going to be significant for investors, and they may not choose to pay the premium they paid last year for the stock,” she explained. “Goldman will look more like its peers this year, and as a result I think it’ll trade more like its peers.”
The upside? The current crisis is a buyers’ market in the making.
“There are going to be great buying opportunities,” she noted. “Any stock you love you can buy this year at a much better bargain.”
Armed with a history degree from Brown, Whitney came to research 16 years ago when Wall Street was the most competitive place she could find to work. Hedge fund manager Steve Eisman, Whitney's first boss at Oppenheimer, said she did not know a thing about analysis but learned fast.
Now clients like hedge and mutual fund managers praise Whitney for coolly dissecting complicated financial statements and having the courage to stray from Wall Street's pack.
Whitney has a knack for staying in touch and delights people with an ability to laugh at herself and enjoy a party. Former boss Steve Eisman helped celebrate Whitney's marriage to Layfield, nearly three years ago, and remembers the wedding as "one of the most fun ever." He also said: "I've never felt so small. Those people were huge."
Now, Ms. Whitney’s advice is taken much more seriously — which is why you’ll find her most recent predictions in the pages of Business Magazines. She recently spoke with Maria Bartiromo about the bumpy road ahead for banks.
Amid the deepening credit crisis, Citi will not be the only bank cutting dividends on the heels of fourth quarter losses, Ms. Whitney told Ms. Bartiromo.
Wachovia and Bank of America, which recently resorted to another round of capital raises — $3.5 billion and $13 billion, respectively — are especially strong candidates for dividend cuts, she noted. “At certain point people might start to think, well, maybe it will simply be cheaper to cut our dividend,” she said.
If such predictions prove correct, Wachovia and Bank of America shareholders will hardly be alone in their misery, Ms. Whitney added. “You can’t take anyone off the table because the loss curves have accelerated at such a pace from the third quarter to the fourth quarter that people’s earning are going to be in jeopardy this year.”
Ms. Whitney also explained her recent downgrade of Goldman Sachs, which until now was a star performer among banks weathering the credit crisis.
“[Goldman shares are] going to probably do mid-teens [return on equity], and so the comedown is going to be significant for investors, and they may not choose to pay the premium they paid last year for the stock,” she explained. “Goldman will look more like its peers this year, and as a result I think it’ll trade more like its peers.”
The upside? The current crisis is a buyers’ market in the making.
“There are going to be great buying opportunities,” she noted. “Any stock you love you can buy this year at a much better bargain.”
Armed with a history degree from Brown, Whitney came to research 16 years ago when Wall Street was the most competitive place she could find to work. Hedge fund manager Steve Eisman, Whitney's first boss at Oppenheimer, said she did not know a thing about analysis but learned fast.
Now clients like hedge and mutual fund managers praise Whitney for coolly dissecting complicated financial statements and having the courage to stray from Wall Street's pack.
Whitney has a knack for staying in touch and delights people with an ability to laugh at herself and enjoy a party. Former boss Steve Eisman helped celebrate Whitney's marriage to Layfield, nearly three years ago, and remembers the wedding as "one of the most fun ever." He also said: "I've never felt so small. Those people were huge."
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