Just when you thought it was safe to take a look at the U.S. banking sector, Oppenheimer & Co. Inc. analyst Meredith Whitney is taking a cleaver to industry once more, cutting first quarter earnings estimates for a bunch of banks.
“It’s back to the chopping block,” declares Ms. Whitney in a note outlining more doom and gloom for the industry despite the Federal Reserve’s recent injection of cash that appeared to have settled nerves on Wall Street.
Ms. Whitney is the bearish analyst whose downgrade of Citigroup Inc. (NYSE:C) last year led to a global sell-off of banking stocks. Now Oppenheimer is reducing first quarter earnings estimates by 84% on average for the U.S.banks to reflect more mortgage writedowns and higher charges on collateralized debt obligations, and commercial mortgage backed securities.
Ms. Whitney forecasts Citigroup will record a per share loss of $1.15 in the first quarter compared to her previous estimate of a loss of $0.28. She rates Citigroup, Merrill Lynch & Co. (MER) and UBS AG (NYSE:UBS) “underperform,” and warns that earnings estimates could yet fall further.
Ms. Whitney said:
Since November, we have cut estimates for financials over 30 times, with no clear end in sight. As key mark-to-market indices trend lower, the housing market worsens, and the U.S. consumer comes under increasing pressure, we anticipate further downside to both estimates and stock prices.