Oppenheimer

Does Meredith Whitney have a new target?

Jim Kim — Sun, 05 Oct 2008 09:42:05 -0400

The powerful analyst at Oppenheimer, who is hardly shy about voicing her criticisms of such bank as Citigroup and Lehman Brothers, may have a new target. In Fortune interview, she says, "The Paulson plan doesn't make a lot of sense to me..." She says the real issue isn't junky assets, it's confidence. Of course, one could argue that that is what the bailout plan is intended to do, create confidence. She expects that we'll see some "loosened" accounting and capital standards, as a way to help banks out. The SEC has indeed released some guidance that some interpreted as a slight weakening of fair value accounting. In her view, that's not ideal, but better than a blank-check kind of rescue plan. She seems to favor a plan that would focus on the big companies able to add liquidity quickly rather than propping up weak banks. Incidentally, Whitney ranks No. 35 on Fortune's list of most powerful women.

For more:
- here's the interview

Meredith Whitney weighs in on Merrill Lynch

Jim Kim — Sun, 06 Jul 2008 19:07:14 -0400

Superstar Oppenheimer analyst Meredith Whitney has trained her sights on Merrill Lynch. She now expects Merrill Lynch to take total writedowns of $5.8 billion for the second quarter, to cover losses on CDOs, hedges with bond insurers and various other items. That will result in large losses. According to the AP, Whitney now predicts Merrill Lynch will lose $4.21 a share for the quarter. Previously, she was expecting a gain of 20 cents. It's common these days for analysts to go super bearish as earnings day approaches. For the most part, this approach has worked well. Whitney is hardly the only analyst to go bearish on Merrill ahead of its earnings announcement.

For more:
- here's the AP article on Whitney

Tier 1 capital becoming a big issue?

Jim Kim — Wed, 25 Jun 2008 21:13:40 -0400

Financial News Online reports that investment banks soon will start reporting Tier 1 capital ratios, something they have not done previously. (Commercial banks have been doing this for years.) That just might throw an even more intense spotlight on perceived capital deficiencies at top banks, at least according to Oppenheimer analyst Meredith Whitney. At the same time, new Basel II rules might require more capital. Furthermore, the SEC might start requiring more capital for certain types of level three assets. All of this adds up to more erosion of the business model that worked so well for so many years: leverage up like crazy to generate super high returns. Higher capital requirements will make that hard, leaving us to wonder again: what's next?

For more:
- here's the Financial News Online article

Meredith Whitney speaks again

Wed, 21 May 2008 06:59:57 -0400

In times such as these, an analyst really can make a name for herself. Oppenheimer's Meredith Whitney rocketed to fame based in part on prescient prediction that Citigroup would be forced to cut its dividend. She's been a bear for a while now, and judging from her latest report to client, there is no reason for anyone to change stances now. As reported by Portfolio, Whitney says the "real harrowing days" of the credit crunch remain ahead of us. That puts her at odds with the many who say the opposite. In her view, banks will need to cover another $170 billion in loan losses by the end of 2009, and earnings projections are still way too rosy. You have to wonder what it will take for her turn a bit more optimistic.

For more:
- here's the Portfolio article

Whitney more cautious on second quarter

Wed, 14 May 2008 06:59:58 -0400

Meredith Whitney, of Oppenheimer, is telling clients that broker-dealers' second-quarter earnings are under pressure, reports MarketWatch. One new twist comes from the credit defaults swap market. She argues many banks apparently realized temporary gains when prices for CDSs rose in the first quarter. Unfortunately, that reversed in the second quarter, and may translate into losses. In particular, she notes Merrill Lynch had a $2.1 billion gain on "the fair value of company debt due to credit spreads widening." Other banks also benefited, but that may prove transitory. Whitney cut estimates for the top four investment banks by an average of about 40 percent for the second quarter and nearly 50 percent for the year. She recommends Goldman Sachs, Lehman Brothers and Morgan Stanley as market performers and rates Merrill Lynch under-perform.

For more:
- here's the MarketWatch summary

More on Citigroup's surprise common offering

Thu, 01 May 2008 06:59:54 -0400

People are still jawing about Citigroup's surprise offering this week--the bank's fifth capital-raising effort in five months, notes MarketWatch. The bank raised $4.5 billion, more than the originally announced $3 billion. Still, Meredith Whitney, analyst at Oppenheimer, couldn't understand why the bank didn't hit the well for a lot more. She reckons the bank needs up to $15 billion more. William Tanona, of Goldman Sachs, told clients that the offering may have been the result of pressure from credit ratings agencies. That makes sense, given the massive preferred offering recently. So what's going to happen from here? Well, a dividend cut wouldn't be out of the question. Neither would a big investment from some third party. Nor would asset sales of some kind. A lot of uncertainty continues to surround the bank.

For more:
- here's the MarketWatch article

Citigroup to issue $3 billion in common stock

Wed, 30 Apr 2008 06:59:54 -0400

When it was announced that it would sell $6 billion in preferred shares, Citigroup joined the herd of other top banks. It just announced it will issue $3 billion more in common shares--at a 4 percent discount--a move that will further bolster its capital position. In particular, notes the New York Times, it eases the capital crunch that the issuance of preferred shares created; certain regulatory limits were in play with preferred share sales. The issue is whether this will solve Citigroup's capital problems. Meredith Whitney, the Oppenheimer analyst who has emerged as the bank's bete noire, says the dividend is still in danger, despite assurances from CEO Vikram Pandit that the payout was in line with earnings projections. She thinks the bank needs to raise up to $18 billion more.

For more:
- here's the New York Times article

How low can Citigroup's dividend go?

Tue, 22 Apr 2008 06:59:55 -0400

Oppenheimer analyst Meredith Whitney is making a career in some ways off of Citigroup. She was among the first and the boldest to predict that Citigroup would have to slash its dividend and take other capital raising steps. She was right, of course, and earned a bit of fame. This year, Citigroup has cut its quarterly dividend from 54 cents to 32 cents, the AP notes. Now, Whitney says that Citigroup may have to cut the dividend even more, or eliminate it all together. Certainly, the bank's earnings are under pressure; it likely will lose money this year. The wild card is its other capital raising efforts. We presume some are underway. Which would be worse: another round of external capital raising or the elimination of the dividends? A tough spot for common shareholders.

For more:
- here's the AP article

Search the web for: Citigroup | Meredith Whitney | Oppenheimer

Is Wall Street research unreliable?

Mon, 31 Mar 2008 07:59:56 -0400

Wall Street research analysts in many ways are still struggling to regain their stature. Portfolio magazine doesn't do them any favors by calling into question whether such research, especially when applied to banking, has any value at all. The fall guys here are Meredith Whitney, a star analyst at Oppenheimer, and William Tanona of Goldman Sachs. There has been a lot of analyst activity recently, and people are right to take it all with a grain of salt. Whitney notes in the report that she has very little confidence in her estimates. The fact is that investment banks have always been hard to predict; one reason for their traditionally low multiple. And these are unusual times.

For more:
- here's the Portfolio article

How bad will it be?

Tue, 18 Mar 2008 07:59:57 -0400

Meredith Whitney, storied bank analyst at Oppenheimer, has some bad news for equity investors who bet that the worst was over. According to Times Online, she's telling clients that big bank stocks could fall by another 50 percent, with the worst hit to be Merrill Lynch, Citigroup and UBS. Earnings news is now trickling out (Bear Stearns of course canceled its report). But the coming writedowns combined with the heightened fear makes for falling stock prices. Keep your eyes on CDS spreads as well. The costs of protecting against a Lehman Brothers default is at scary, Bear Stearns-like levels. Any real earnings surprises could lead to another round of rumors. And we know how those can really devastate a firm.

For more:
- here's the article from Times Online

Related Articles:
Writedowns may be masking some good news. Article
Writedown rankings: Citigroup on top. Article
What to make of Citigroup's big loss? Article
The mystery of Merrill Lynch's stock drop. Article
Also Noted: UBS takes $14 billion writedown. Item
Pain continues to spread to UBS, WaMu and Bank of America. Article
How big will Citigroup's 4Q writedown be? Article