While some experts say the housing sector has bottomed, bank analyst Meredith Whitney disagrees.
“I’m steadfast in my belief there’s going to be a double-dip in housing,” she says. “You will see clearly that the banks are under-reserved when housing dips again.”
Banks also are vulnerable to a double-dip in the consumer credit market, Whitney maintains.
“For the consumer, nothing has changed, and the large banks are still weighed down by exposure to consumers,” she told Bloomberg.
“If consumer credit turns (down), which we think it will, you will underperform with all these banks.”
The earnings improvement banks have experienced recently won’t last, Whitney says. Banks reaped the rewards of write-ups tied to fixed-income assets in the first quarter, she points out.
They also benefited from government support that is now being withdrawn, she says.
“A vast majority of last year’s profits for the banks were government-induced,” Whitney said.
Investors buying bank stocks now are asking for trouble, she says.
“I’ve been amazed to see the demand come back time and time again for financial institutions that are still not paying dividends and still may not be able to for a while,” Whitney said.
Ace Yale economist Robert Shiller is worried about housing too.
“I don’t know if it will be a double dip. But it could be weak performance in the real estate market and in the overall economy,” he told CNBC.
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