Discussing whether the sector is out of the woods yet, with Christopher Whalen, Institutional Risk Analytics senior vice president/managing director and CNBC’s David Faber.

Category: Bailouts, Credit, Video

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4 Responses to “Christopher Whalen on Banking”

  1. bruerr says:

    Christopher Whalen looks like he is working the trench lines. Good interview Whalen. Nicely done.

    3:05: Cash flows on assets falling.

    Sector Spotlight: “Q209 Likely to contain more earnings spin & accounting gimmicks than Q1.”

    Its hard for banks to survive without debt to equity swaps.

    On Citi: Can be restructured short of bankruptcy, but will need real leadership. (If it does go down) CIT bankruptcy will surprise people by how disruptive it will be. Opinion: CIT should not be bailed out; the company needs to be restructured. Future of Citigroup (with a smile): Restructuring. Resolution. Rebirth. …(that last as interview closes, 6:25)

    On WABC, BOH: Westamerica Banc, Bank of Hawaii, these are companies that take a very hard nose position on credit. They want to get paid back and it shows. They are hyper-efficient…profits fall right down to the bottom line. Opinion: They are so expensive. Sometimes trade 1.5-2 times book.

    On WI: Marshall & Isley was covered in blood last year. Southwest exposure. They were taking the properties to the curb as aggressively as they could. They have slowed down their reserve build. Questions remain: Is it time to buy? Are they done with their reserve build? Or, do we have to wait and see if they have to start adding reserves again at the end of the year. For most banks, the answer is going to be, we have to wait. Especially if they have a lot of exposure in problem areas like the southwest, or, even, a lot of the metro areas. .. Remember everything in foreclosure now, is going to work its way through the courts. When its released for sale we (Faber interrupts Whalen here, possibly … we might get the price worked out).

    On the Sector: We have to stop thinking about banks as though they were tech stocks. These are really meant to be dividend (cash distribution businesses) plays. They are not meant to be capital appreciation (businesses) plays. Opinion: Believes banks will go back to being utilities (hope he is right – we need some stability in this sector).

    On GS: Not a bank. Don’t think of them as a bank. They are a trading desk with a private equity fund. They are paranoid and nimble. Opinion: Has a positive outlook on them, because he thinks they are going to make money. Its very easy for them to shift their business model, quarter to quarter. Very difficult for the (real) commercial, universal banks (traditional banks).

    Overall Whalen handles the interruptions better than I have seen in a long time. The composure is good. Calmly approaches the life support line banks are on, walks Faber carefully through review of the sector (the patient’s condition). Such care is needed to defeat Faber’s attempt to try to put words in the guest’s mouth. Whalen walks it off well, underscoring Time and Caution, while Faber is acting the part of a weasel, trying to work in that it is time to buy, trying to get Whalen to concede a turning point. But Whalen holds the line of not out of the woods yet.

  2. [...] Banks that are reporting so far this quarter seem to be saying that the write-offs will start to level off in about two quarters, although banking expert Chris Whalen says that the level may stay higher than we think for longer than we think. There are a lot of assets to write off, and they are just now getting to the commercial real estate problems. This is going to take time. (For an interesting interview on CNBC with Maine fishing buddy Chris Whalen, click here: http://www.ritholtz.com/blog/2009/07/christopher-whalen-banking/.) [...]

  3. [...] Banks that are reporting so far this quarter seem to be saying that the write-offs will start to level off in about two quarters, although banking expert Chris Whalen says that the level may stay higher than we think for longer than we think. There are a lot of assets to write off, and they are just now getting to the commercial real estate problems. This is going to take time. (For an interesting interview on CNBC with Maine fishing buddy Chris Whalen, click here: http://www.ritholtz.com/blog/2009/07/christopher-whalen-banking/.) [...]

  4. [...] Banks that are reporting so far this quarter seem to be saying that the write-offs will start to level off in about two quarters, although banking expert Chris Whalen says that the level may stay higher than we think for longer than we think. There are a lot of assets to write off, and they are just now getting to the commercial real estate problems. This is going to take time. (For an interesting interview on CNBC with Maine fishing buddy Chris Whalen, click here: http://www.ritholtz.com/blog/2009/07/christopher-whalen-banking/.) [...]