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ANALYSIS

Dow jonesing for a makeover, critics contend
By Deepa Seetharaman
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
 
OpEd: Forget inflation, deflation is the real worrier
By Hans-Werner Sinn
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
 
Is Obama just bluffing on banks?
By Ronald Fink
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
 
For a change, some good news from the finance front
By Matthew Quinn
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
 
MORE ANALYSIS
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Banks need to scare up even more capital, says analyst Whitney
Loss provisions, credit-rating downgrades will pile the pressure on

January 7, 2009 7:58 AM ET

(Reuters)—U.S. banks will have to raise additional funds in 2009. Meanwhile, a sharp increase in credit-rating downgrades on mortgage-related securities will lead to further stresses on the companies’ capital, according to prominent banking analyst Meredith Whitney.

“From July 2007 to date, over $5 trillion worth of securities have been downgraded, but our concern here is that the pace of downgrades has only accelerated through 2008,” the Oppenheimer analyst wrote in a research note dated January 6.

“Capital ratios will be meaningfully lower in the fourth quarter (of 2008) versus post TARP pro forma levels,” she said.

Since the summer of 2007, Wall Street has been hammered by a sharp pullback in debt markets, which began with mortgage woes and escalated into a credit crisis, slowing economic activity around the world.

The U.S. Treasury’s $700 billion Troubled Asset Relief Program (TARP) was established in October 2008 primarily as a means to recapitalize banks and take bad assets off their books to help support creaking credit markets.

Apart from the more than $40 billion in fourth-quarter write-downs and loss provisions the analyst expects from the group of bank stocks under her coverage, Ms. Whitney also anticipates “capital strains to become apparent from ratings change pressures.”

J.P. Morgan Chase will have the largest increase in fourth-quarter 2008 loss provisions at $6.2 billion, compared with $2.5 billion in the year-earlier period, the analyst said.

Ms. Whitney, who maintained a cautious stance on the U.S. banking sector, expects Bank of America’s fourth-quarter loss provision will be $6.7 billion, compared with $3.3 billion a year earlier.

Citigroup’s provision for the period will be $7.9 billion, while Wells Fargo’s will be $4.4 billion, the analyst said.

Write to the editors at fw_editor@financialweek.com.
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