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CNBC TRANSCRIPT: MEREDITH WHITNEY, FOUNDER & CEO MEREDITH WHITNEY ADVISORY GROUP, ON CNBC’S “CLOSING BELL” TODAY

WHEN: TODAY, TUESDAY, JULY 3RD

WHERE: CNBC’S “CLOSING BELL

Following is the unofficial transcript of a CNBC interview with Meredith Whitney, Founder & CEO Whitney Advisory Group, on CNBC’s “Closing Bell” today. Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000100706&play=1.

All references must be sourced to CNBC.

BARTIROMO: MEREDITH WHITNEY JUST DOWNGRADED DOWNGRADED JPMORGAN TO A HOLD RATING. SHE'S ON THE PHONE WITH US RIGHT NOW. THE STOCK DID MOVE ON THE DOWNGRADE. THANKS FOR CALLING IN.

WHITNEY: SURE.

BARTIROMO: TELL US WHAT’S BEHIND THIS DOWNGRADE OF JPMORGAN AND WHAT'S YOUR SENSE OF THE COMPANY NOW AND WHY DOWNGRADE TODAY?

WHITNEY: THE DOWN GRADE HAD BEEN A LONG TIME COMING. THE FACT IS IT WASN'T IT WASN’T THE RIGHT TIME TO DO IT WHEN THE COMPANY ANNOUNCED THE $2 BILLION WRITE DOWN AND THE STOCK WAS DOWN PRECIPITOUSLY AT THAT TIME THE STOCK HAS RALLIED 17% TRADING AT A LITTLE BIT ABOVE TANGIBLE BOOK. WE DECIDED, BEFORE THE HOLIDAY WEEKEND, IN LIGHT OF THIS LIBOR EVENT, WHICH I THINK IS GOING TO GET A LOT BIGGER, TO CASH IN CHIPS NOW, THIS WAS THE ONLY LARGE BANK CAP STOCK WE HAD RECOMMENDED. SO NOW, IT'S MORE IN LINE WITH OUR NEGATIVE STANCE ON THE GROUP. I WOULD HAVE TO SAY NOW I THINK MORE THAN OVER THE LAST COUPLE OF YEARS, THERE'S EVEN MORE REASON TO BE PARTICULARLY CONCERNED ABOUT THESE LARGE CAP BANKS.

GRIFFETH: MEREDITH, CLEAR SOMETHING UP FOR ME. I HEARD WHEN WE FIRST ANNOUNCED YOUR DOWN GRADE, THE PRICE TARGET WAS STILL AT $45. IS THAT CORRECT? THAT'S HIGHER THAN WHERE IT'S TRADING NOW. IT WAS $37 THE LAST I SAW.

WHITNEY: IT’S HIGHT BUT IT'S REALLY ONLY REFLECTIVE OF WHAT WE THINK IS GOING TO BE 12 MONTHS OUT BOOK VALUE. WE DON'T THINK THERE WILL BE INCREDIBLE APPRECIATION IN BOOK VALUE. THESE BANKS ARE NOT EVEN EARNING THEIR COST OF CAPITAL. AND I THINK THAT IN LIGHT OF WHAT HAPPENED WITH THIS PROPRIETARYLOSS, WHO KNOWS WHAT IT WILL BE WHEN THE COMPANY REPORTS NEXT WEEK. YOU ARE GOING TO SEE THE BANKS ARE REALLY STRUGGLING TO EARN COST OF CAPITAL, WHICH MEANS THEY'RE NOT GROWING CAPITAL. WE TRIED TO BE FAIR HERE. JPMORGAN IS CERTAINLY NOT THE WORST OF THE LITTER BUT ITS SANDWICHED BETWEEN WELLS FARGO AND CITI AND BANK OF AMERICA AND THAT'S PROBABLY APPROPRIATE.

BARTIROMO: HOW BAD CAN THIS GET? I MEAN YOU’VE GOT JPMORGAN TALKING TO SHAREHOLDERS NEXT WEEK, THEY’RE NOW FACING ANOTHER INVESTIGATION FOR THE ENERGY DIVISION THERE. YOU HAVE THIS BARCLAYS-LIBOR SCANDAL. YOU SAY OTHER BANKS COULD BE INVOLVED. TELL US HOW BAD THIS COULD BE AND WHAT YOU MEAN BY THAT, HOW BAD THIS GETS. DO YOU THINK THE JPMORGAN LOSS COULD BE AS HIGH AS $9 BILLION? WHAT'S YOUR TAKE ON HOW BIG THAT TRADING LOSS BECOMES?

WHITNEY: IT'S TOUGH TO SAY CERTAINLY ITS ARGUABLE THAT IT’S A LOT LARGER THAN THE $2 BILLION THEY ANNOUNCED LAST MONTH. I HEARD AS HIGH AS 8 AND RUMOR CIRCULATING CLOSER TO 5. WHO REALLY KNOWS ITS CERTAINLY LARGER THAN $2 BILLION. AND STRIPPING OUT THAT YOU HAVE TO SEE WHAT THESE COMPANIES REALLY EARN. I THINK THAT'S GOING TO BE THE MOST DISTURBING PART OF NEXT WEEK'S RESULTS AND FOR THE GROUP IN GENERAL. THE FUNDAMENTALS FOR THE GROUP ARE SO BAD NOT ONLY IN FLAT YIELD CURVE ENVIRONMENT, BUT IN INVESTMENT BANKING ENVIRONMENT, THAT IS SCREAMING FOR HEAD COUNT REDUCTIONS AND DOWNSIZING. THE FUNDAMENTALS ARE LOUSY. I THINK WITH RESPECT TO THE LIBOR SCANDAL, IT'S REALLY BAD. THE FINANCIAL SYSTEM GLOBALLY IS PREDICATED ON A FAITH-BASED SYSTEM. IF YOU HAVE BANKS MANIPULATING RATES ON WHICH SO MUCH FINANCIAL ACTIVITY IS BASED UPON, IT REALLY GETS TO THE CORE OF HOW MUCH FAITH DO YOU HAVE IN THE SYSTEM. THE REGULATORS ARE GOING TO BE AND SHOULD BE ALL OVER THIS. I KNOW THE LEGAL COMMUNITY IS AT WITS END ABOUT THIS. I THINK IT WILL BE A VERY VERY BIG DEAL FOR THE INDUSTRY.

BARTIROMO: ALL RIGHT. WE'RE WAITING ON THE LIVING WILLS INFORMATION THAT SHOULD BE OUT ABOUT 2:00 P.M. EASTERN TODAY. DO YOU THINK THEY HAVE ANY FLEXIBILITY IN TERMS OF SELLING ASSETS, REAL QUICK ON LIVING WILLS, WHAT ARE YOU EXPECTING?

WHITNEY: SOME BANKS HAVE MORE FLEXIBILITY THAN OTHERS SO DEPENDING UPON WHO CITI AS AN EXAMPLE BOUGHT SO MUCH SO EXPENSIVELY, IT DOESN'T HAVE A LOT OF GAINS TO REAP FROM SELLING ITS ASSETS. THERE ARE OTHER INSTITUTIONS THAT HAVE A LOT MORE TO SELL. EACH BANK IS REALLY ON AN INDIVIDUAL CASE BY CASE BASIS.

BARTIROMO: ALL RIGHT. WE'LL LEAVE IT THERE. MEREDITH, GREAT TO TALK TO YOU. THANKS FOR CALLING IN ON THIS DOWNGRADE.

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