Tags: Bove | Bank | Stocks | shares

Dick Bove: Bank Stocks Poised to Soar 25%

Wednesday, 14 March 2012 12:21 PM

Rochdale Securities vice president and banking analyst Dick Bove says U.S. bank stocks will rise by 25 percent this year, in part because the European crisis has sent investors running for safety to America.

"If you wrap it all up, in 2011 the banking industry had its third most-profitable year ever in the history of the industry," Bove told CNBC. "No one has cared about any of that, no one has looked at that.

"What the federal stress test did was force people to start looking at those fundamentals and recognize that this industry for the last year has been doing extraordinarily well, and at some point that's going to drive these stocks a lot higher than they were driven yesterday."

He had been a sharp critic of the stress tests administered by the Federal Reserve because he believes the tests "could harm the economy through mandating the direction of the banking system."

But now that the tests are over, Bove thinks this is a good time to buy.

"Bank stocks will move from discounts to book value to premiums to book value, and that will drive them up certainly 25 percent by the end of this year and probably a lot higher," sys Bove.

"In the next two to three years we are in a period in which bank earnings are going to soar and in which bank stocks are going to move sharply higher."

According to thestreet.com, the 19 large, complex bank holding companies subject to the Fed's Comprehensive Capital Analysis and Review for 2012 were stress-tested under a severe economic scenario that included real U.S. GDP contracting "sharply through late 2012, with the unemployment rate reaching a peak of just over 13 percent in mid-2013," while also assuming "that U.S. equity prices fall by 50 percent from their Q3 2011 values through late 2012 and that U.S. house prices fall by more than 20% through the end of 2013."

In addition, under the Fed's adverse scenario, "foreign real GDP growth is also assumed to contract, with growth slowdowns in Europe and Asia in 2012."

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Wednesday, 14 March 2012 12:21 PM
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