Meredith Whitney predicts bad year for banks

While many investors are calling a bottom in financials, banking analyst Meredith Whitney says not so fast. Meredith Whitney, in case you're unaware, was the first banking analyst to prominently point out the problems with the big banks.

A surge in borrower defaults and unemployment pressures will make 2009 an even uglier year for banks than last year, analyst Meredith Whitney said.

She predicted "breakups and M&As on a grand scale" as the industry seeks to remake itself in the face of all its capital pressures.

"I don't think this year is going to look any better than last year," Whitney said in an interview Tuesday on CNBC. "In fact it will look worse because there's so much credit coming out of the system."

Whitney, a former analyst at Oppenheimer who recently opened her own firm, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.

As some have been predicting the worst may be over for the banking sector, Whitney countered that many of the statements about some of the big banks showing profits ignore the burden that additional writedowns will pose through the year. In particular, she said Citigroup's statement that it had turned a profit the first two months of 2009 might came back to haunt it once a fuller picture was presented.

Consumers also will face pressure as unemployment grows and banks and credit card companies start calling in credit lines to avoid getting stuck with even more bad debt.

"The probability of more people going into default is higher, so the banks are going to have a tough time," she said.

She also predicts that U.S. home prices will fall 40%+ peak to trough. I'd say she's dead-on accurate.