Meredith Whitney saw the troubles in the world's financial sector long before they became reality. Now, one year into running her own firm, Meredith Whitney Advisory Group, she's still believes major banks are not out of the Woods.

Speaking to me today on the "Closing Bell", Whitney told me bank regulation will certainly bring higher capital levels which will ultimately translate into lower returns.

Declining bank assets have pushed Whitney's profit expectations to be 30% below Wall Street's expectations. Primarily, Whitney points to lending portfolios which she says are down four to twenty percent so far this year, with another 10 to 15% drop yet to come.

"As the government takes the punchbowl away, is going to hurt profits." Whitney added, meaning stocks will be lower, by 10-15% for large-cap names. While regional stocks will also be hit, with Whitney predicting a wave of consolidation.

As for her "least worst" pick, Whitney pointed to Bank of America -- not because of earnings power -- but because of its assets available for sale.

Whitney believes the story for banks is not who will destroy capital, but who creates the most.

Dorian Langlais contributed to this article.

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