Meredith Whitney Made Two Bullish Calls On Financials Last Month, Here's How They're Doing

Bloomberg Risk Takers

Last month Meredith Whitney spoke to Maria Bartiromo on CNBC's Closing Bell and said she was more bullish about U.S. Equities than she had ever been in her career.

That was big news in this uncertain environment. Just as importantly, though, she specifically mentioned two financials she liked during that call — Bank of America and Discover.

Now that earnings are in we know how they're is doing.

Bank of America, as we know, missed analyst expectations by 2 cents on earnings per share and beat slightly on revenue. The bank was dragged down by a 20% drop in fixed income, currencies and commodities trading (just like everyone on the Street) and real estate losses that widened from $1.1 billion in Q4 to $1.3 billion.

Revenue from the bank's mortgage business was down as well — Part of what Whitney, last fall, called the "endless beat down" of legal fees Wall Street would experience for a long time to come.

All that said: What Whitney likes about Bank of America has nothing to do with any of that. She likes cost cutting, which Bank of America did and is continuing to do. In fact, CEO Brian Moynihan said it was one of the reasons the bank's trading operations took a hit.

Whitney also likes businesses she knows that Wall Street has traditionally considered boring, and those businesses won this earnings season.

Bank of America was essentially carried by its brokerage business, which posted a 7% revenue gain. It's not "sexy" but the money sticks around since investors don't tend to change brokers a lot. The stock is moving up from its post earnings announcement hit and is up 3.54% today.

The stock is moving up and Whitney is likely still bullish because, real estate business aside, moving from the sexy parts of Wall Street's business to the unsexy parts is what Bank of America's "New BAC" plan is calling for.

From Bloomberg:

During the years immediately after the financial crisis, “Merrill was the only thing that was working as the commercial bank was getting pummeled by real-estate losses,” said David Knutson, a credit analyst with Legal & General Investment Management America...

“Moynihan recognizes that there are regulatory changes coming and that Merrill may not have as meaningful a revenue contribution in the future,” Knutson said. “His view is that it’s going to be a large commercial bank with an investment bank to facilitate large commercial customers, instead of an investment bank that will go out and seek risk on its own.”

Discover, on the other hand, beat expectations all around in its earnings announcement this morning. Bloomberg's analysts had EPS at $1.12, Discover posted an EPS of $1.33. Meanwhile net income rose by 3.5% to $673 million. Lending expanded while delinquencies contracted and the stock is up 1.4%.

So what does this tell us about the U.S. economy? It's pretty simple. Americans feel okay expanding credit (and debt) but only to a point. They're not ready to buy houses, but they are ready to get a new credit card.

That's something.