Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group LLC, spoke with Bloomberg’s Jonathan Weil about the outlook for the U.S. financial industry. They speak at the Bloomberg Markets Global Hedge Fund and Investor Summit in New York.
Here are a couple of excerpts from the interview: Courtesy of Bloomberg Television
On how a U.S. bank holding company could get a ‘buy’ rating from her:
“I’m always a sucker for valuation so [WEIL: But they weren't cheap a year ago from what you were seeing at that moment.] They haven’t, well, hold it – that’s not – that’s Bank of America at three bucks is, I thought I don’t know what I’m doing because this defies any sense to me. They’ve got a lot of stuff to sell so valuation will always entice me. If there’s another leg down in housing, and even if there isn’t, my estimates are so different from the Street. I just don’t see the earnings power of these institutions by and large. So if, you know, consensus came down and there was enough baked into the stock and the stocks were lower it would be a – that would tempt me.”
On bank earnings fueled by government backing:
“From a, let’s just talk about specifically last quarter and that business with the government fuel. If you look at what happened throughout last year I would say a vast majority of the profits for the banks, but not just profits, its capital creation was government-induced. I mean, over $100 billion would dwarf the capital that companies raised themselves, so enormous profitability. And I also call it the government’s actions putting a lifeguard on duty so people play in the pool so enormous flow, enormous security so that there could be flow. What happened in the first quarter, so what we – I started to – I’ve been a bull and a bear and fundamentally I’m still very cautious, but I started to get more, sort of, in the cost camp in the fall because I thought so much of what happened last year, because the government’s out of the lifeguarding business for the moment, was not replicable. So if you look at what happened in first quarter results I would say not much had to do with the government.”
