The banking system is performing better than its current perception, Rochdale analyst Richard Bove said on Forbes Intelligent Investing.
"What is not being seen is the fact that banking cash flows are staggeringly positive, that banking equity is at record levels, that reserves are ultimately going to come down, driving banking profits substantially higher,” he said.
"Now, it may take two, three, four quarters before we start to see that. But that’s the positive that’s being missed.”
He said banks are now headed into a period of "normalcy" and are on the mend.
"We are seeing a recovery," Bove said.
While commercial real estate values have fallen and vacancies are on the rise, there is a "significant" amount of money available for refinancing through secondary offerings, he said.
However, Bove said the construction segment of the commercial market will be under "significant stress" and losses will be sizeable.
He cautioned that regional banks face a long road ahead and will see "serious" loan losses in second and third quarters and won’t perform as well as the larger banks.
Bove predicted that banks will show a "300 to 500 percent increase" in earnings for the next four to five years because banks restructured their balance sheets to "produce that type of result."
On CNBC's The Call, Bove advised investors to "stick with the capital market-oriented" financials and stay "light in the regional banks."
However, the Federal Deposit Insurance Corp. is still working to cope with more bank failures coming from bad mortgages, said a Texas economist, the Tampa Bay Business Journal reported.
"They know they’re going to take down a large number of banks and they can’t do it until they’re staffed up,” said Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University, at a Tampa real estate conference.
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