Independent bank analyst Dick Bove says bank earnings reports so far have been “terrible” and will stay that way in terms of second-quarter earnings.
But that shouldn’t hurt bank stocks because investors are grading on an easier curve now, he told CNBC.
“The quarterly reports of the big banks were terrible right across the board,” excluding Goldman Sachs, he says.
“JP Morgan had no earnings,” he says. “It had big capital gains that it pulled out from somewhere to come up with a positive number.”
As for Citigroup, “it lost money,” Bove says.
“If you … look at Bank of America, they … fooled around with their loan-loss provisions.”
That raises the question: “Why were these numbers, which would have destroyed these stocks last year … so positive?” Bove asks.
“The answer is the change in psychology,” he says.
“A year ago when everybody thought they would be nationalized, you would look at them on a tangible common equity basis. .… Today you argue about what are normalized earnings at these banks.”
The market is saying is that we’re willing to accept some pretty bad numbers and still buy the stock, Bove asserts.
“You’re going to see terrible earnings out of just about every bank that reports, because most of them don’t have the benefit of capital markets activities,” he says.
Goldman Sachs is bullish on bank stocks too.
“We expect these sources of earnings strength to continue,” its chief investment strategist David Kostin wrote to customers.
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