US banks: more housecleaning ahead

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Hello list,

 

This analyst says that banks have postponed dealing with a lot of bad debts which they will have to admit in 2010, maybe by the middle of the year. This is consistent with Jupiter, as general indicator of banking and 6th lord of financial stability passing through the sign Aquarius and the 8th house of obstacles and endings in the SAMVA USA chart in the coming six months.

 

Chris Whalen's 2010 Outlook: "A Grudging Admission of the Truth"

 

Posted Dec 18, 2009 07:30am EST

Financials suffered Thursday after Citigroup's massive secondary offering was poorly received and influential analyst Meredith Whitney cut 2010 estimates on Goldman Sachs and Morgan Stanley.

 

 

 

But even prior to Thursday's selloff, a lot of traders were nervously watching the poor action in the financials as a possible "tell" for the broader market. The question is whether the recent weakness is just profit taking after the big gains earlier this year or concern about the fundamentals heading into 2010.

The answer is "yes" (or "both"), according to Christopher Whalen, managing director at Institutional Risk Analytics.

 

In 2009, the momentum created by a "wall of paper fiat dollars" overcame the industry's still-poor fundamentals, driving the sector higher, Whalen says. "Where you see the markets changing in terms of sentiment is where fundamentals are so ugly they can't be ignored."

 

Whalen is sticking by a prior forecast that the fourth-quarter will be a "bloodbath" for the banks but says the real ugliness won't occur until the middle of 2010.

 

Why? Thanks to the Fed's purchases of $2 trillion of securitized assets and accounting rules that allow banks to continue to accrue interest on loans as much as 180 days after they are past due, "there's an awful lot of games going on," Whalen declares. "Most of the pain the banks have felt on their balance sheets this year you're not going to see until 2010."

 

This coming year will be characterized by "increased reserves, charge-offs for loans [and] more housecleaning," he says. "For the big guys, 2010 will bring more grudging admission of the truth."

In other words, the fundamentals will catch up to the momentum in the year ahead; perhaps it's already starting.

 

Such a development would be expected to put a damper on bank lending to households and firms, which in turn will keep a lid on the pace of the recovery.

 

It has earlier been mentioned that in the Saturn sub-period, the economic recovery would likely be sluggish. Moreover, with transit Saturn as 8th lord afflicting natal 10th lord Mars, industrial firms and foreign trade will be under a strain in coming months. With transit Rahu stationary conjunct (3° orb) natal 4th lord Venus for the coming months as well, housing sector and communal harmony will likely show signs of problems.

 

Thor