by Calculated Risk on 5/05/2010 02:25:00 PM

From Nikolaj Gammeltoft and Peter Eichenbaum at Bloomberg: Whitney Says Banks Face ‘Tough’ Quarter, Housing Dip (ht jb)

Banks continue to suffer from losses on non-performing loans, and U.S. home prices will fall again amid increasing supply and sluggish demand, according to [banking analyst Meredith Whitney].

“I’m steadfast in my belief there’s going to be a double- dip in housing,” she said. “You will see clearly that the banks are under-reserved when housing dips again.”

I also think the repeat national house price indexes (Case-Shiller, LoanPerformance) will show further price declines later this year. But, we have to recognize that a majority of the national price declines are behind us, and any 'double-dip' in prices will be much smaller than the previous declines.

My guess is some mid-to-high end bubble areas will see the largest future price declines - so the impact on the banks will depend on their exposure to the those areas.

I think BofA with the Countrywide loans, Wells Fargo with Wachovia / Golden West, and JPMorgan with WaMu are all exposed to the mid-to-high end bubble areas. But all the acquiring banks took large write-downs for these loans earlier, so I'm not sure Whitney is correct about them being under-reserved (it is hard to tell). Of course there are the 2nd lien issues too.