GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Meredith Whitney Sees 'ZERO' Upside Movement on Banks Stocks

May 17, 2012 | About:
Carmine Romano

Carmine Romano

4 followers
While discussing JPMorgan’s (JPM) recent trading debacle with CNBC, Meredith Whitney of Meredith Whitney Advisory Group stated some key points as to why she sees zero movement in bank stocks.

1) Bank stocks have “no business trading above tangible book.”

2) Lower loan-to-deposit ratios have banks using deposits to buy riskier assets.

3) Things are not going to be easy for this industry (regulatory concerns).

Meredith added, "I think investors feel some idea that they have to own the banks because it's a key principle and a key foundation of their portfolio, that the market can't move without the big banks,but the banking industry is changing into such a fundamental structural way that you have to look at financials entirely different.”

Additionally, in an April 25 CNBC interview, she explained how banks were boosting their earnings by selling riskier assets and buying government secured assets. This gives the bank the ability to draw down their loan loss reserves, thus boosting earnings. I had discussed this briefly in my January 2012 article, “Are Regional Banks Free from European Exposure?”

She also stated,"The big banks are kind of zombie-like, treading along, not that interesting," she said. "Some of the regional banks, some of the large regional banks is where the real action is on the downside."

You can find both videos on CNBC.com A general way to make this trade would be to use the KRS - Short KBW Regional Banking ETF or sell any regional stocks you may own.

About the author:

Carmine Romano
By Carmine Romano. I have leveraged expertise in both commodity and stock markets to drive short-term and long-term trades for personal account. Integrated knowledge of economics, fundamental and technical analysis, and statistics / probabilities theories to realize portfolio growth and profitability.
Selected accomplishment:
• Realized average annualized returns on self managed IRA account of 14% from January 2004 to December 2012 (total return 150+).


Save on home energy bills at www.napower.com/224201

Rating: 3.2/5 (12 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK