More pain to come … (part 1)
The credit crunch is far from over, according to Oppenheimer & Co. banking analyst Meredith Whitney …
She sees consumers defaulting and an accumulation of these defaults will appear on the balance sheets of our “beloved banks” …
She is quoted as follows:
“Just as strained liquidity pushed so many small and mid-sized specialty finance companies to beyond the brink, we believe it will do the same with the U.S. consumer,” she wrote. “We believe losses will only accelerate further and far worse than even the most draconian estimates.”
AUTSCH!!!
Whitney said, “the real harrowing days of the credit crisis are still in front of us and will prove more widespread in effect than anything yet seen.”
The impending regulation of the securities market by Washington will only “prolong and intensify” the problem by stripping more available consumer liquidity out of the financial system, Whitney said.
She estimated that $2 trillion of liquidity available to consumers through credit cards, 45% of the total amount available, will disappear.
Banks haven’t even really begun to build reserves for the impending losses.
She estimates more than $170 billion in reserve builds will impair the earnings of large U.S. banks by the end of 2009, on top of the normal loan loss provisions. Large U.S. banks she covers have only taken
$25 billion in reserve builds so far, she said.
Based on these expectations, Whitney cut her earnings estimates the sector further, now 72% below the consensus expectation for this year and 37% below next year’s average analyst expectation.
WILL SHE BE SPOT ON AGAIN???
Buy candles and food … 
Tags: , credit crunch, financials, outlook
