Meredith Whitney upgrades three financial stocks

Mon Dec 17, 2012 5:40pm EST

Dec 17 (Reuters) - Independent research analyst Meredith Whitney told clients on Monday that she has turned positive on financial stocks, upgrading Citigroup Inc, Bank of America Corp and Discover Financial Services to "buy" from "hold."

Whitney, who rose to prominence in 2007 by predicting that Citigroup Inc would run into problems with mortgage holdings ahead of her Wall Street peers, has been pessimistic on the financial sector for some time. Over the summer she predicted widespread layoffs and profit challenges for large banks.

On Monday, she changed her stance, posting on her web site the title of a research report that said, "Shifting to a Positive Stance on Financials: Upgrading BAC, C, DFS."

Whitney cited several factors that will lead bank stocks to rise in the near term, particularly the results of the Federal Reserve's stress test in January, CNBC reported. Bank of America, for instance, will be able to quadruple its dividend after passing that test, Whitney said, according to CNBC.

A representative of her firm, Meredith Whitney Advisory Group, confirmed the CNBC report, but declined to provide a copy of Whitney's research report.

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