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By Eleazar David Meléndez: Subscribe to Eleazar's RSS feed | July 31, 2012 5:34 PM GMT
A bank equity analyst famous in financial circles for her prescient analysis on the global banking sector said Tuesday morning she sees the financial industry shedding another 200,000 people off the payrolls in the coming months.
Meredith Whitney, chief executive of namesake Meredith Whitney Advisory Group, said in a Bloomberg interview with economist Tom Keene that "the old way of making money for Wall Street ... is gone," later adding, "the business models just have to shrink."
Whitney, who became notable in 2007, when she wrote a highly critical, contrary analysis of Citigroup Inc. (NYSE:C) that turned out to be highly accurate, noted that company was still a laggard in cost-cutting initiatives. She emphasized such budget-slashing actions were the only way for big banks to proceed since in "the basic structural capital markets business, there's just not a lot of business."
After hearing a video clip from banking analyst Richard Bove of Rochdale Securities, who said banks would have to shed "100,000 to 150,000 people" dedicated to mortgage processing, Whitney said she anticipated further cuts of 50,000 in other business areas.
"The big banks are effectively on their backs. Shareholders are voting with their feet and saying, 'Get profitable or sooner we're not going to buy your stock'," Meredith said, adding, "I would argue that the banks haven't overfired and are middle of the way through firing."
The analyst's comments came on a day when giant Frankfurt-based Deutsche Bank said it was dumping 1,500 investment bankers globally, and 400 other personnel, as part of cost-cutting measures.
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