Bank of America stock is a steal these days, says Richard Bove, financial strategist at Rochdale Securities — as are Wells Fargo, U.S. Bancorp, PNC Financial and JP Morgan Chase.
Bove credits the government’s relaxation of the mark-to-market accounting rule for only a small percentage of bank bottom line improvements.
Yet things are much better in the banks, Bove says, than anyone thinks.
“The real issue with the banks right now is that their deposits are increasing rapidly, their margins are spreading, their profits are actually going up from an operating standpoint,” Bove told CNBC.
“Ninety-seven percent of the loans in the banking industry today are current, and 98 percent are at least paying interest.”
Banks have already factored in the stunning write-downs most large banks took on home loans and other failed securities, Bove says. When earnings are released in couple of weeks, there will be few if any write-downs in evidence, he predicts.
Bailout funds are intended as insurance against bank failures and are unnecessary for everyday bank operations, Bove notes, adding that banks that received some $600 billion dollars of bailout funds deposited with the Federal Reserve.
Of that, $340 million in TARP cash flowed back this week from four small banks, but the Obama administration doesn’t seem to want the money back, Stuart Varney writes in The Wall Street Journal.
“If the banks are forced to keep TARP cash…the Obama team can work its will on the financial system to unprecedented degree,” Varney says.
“That's what's happening right now.”
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