Tags: Bove | Recovery | Banking | Stocks

Dick Bove: Recovery in Banking Stocks Has Only Just Begun

Friday, 09 March 2012 12:54 PM

Banking stocks are on the rise, recovering from the worst recession since the Great Depression and their healing trend has only just begun, making them ripe for buying, says Dick Bove, a banking analyst at Rochdale Securities.

Financials helped push the Dow Jones Industrials back to 13,000, Bove says tells Yahoo Breakout, a financial news venue.

After posting a healthy 30 percent to 40 percent bounce, financials are still cheap.

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"If you compare banks to where they were six months ago, you'd say, 'Wow, they've really come up a lot,'" Bove tells Breakout.

"But if you compare them to where they were three or four years ago, you'd say, 'Oh my goodness, how could they be this low?'" Bove says, adding that he's in latter group.

On a book value basis, banks remain very cheap, as many financial institutions have replaced toxic assets on their books with cash.

"It's a different ballgame today," Bove says, adding he likes Morgan Stanley, Bank of America and Citigroup. "Book value is real."

Bank executives are a little nervous right now, as the Federal Reserve is set to release results of a January stress test, which would provide insight as to how each would perform under duress.

Regulators say it's their duty to release the results.

"The disclosure of stress-test results allows investors and other counterparties to better understand the profiles of each institution," Fed Governor Daniel Tarullo, the central bank's lead official on supervisory matters, said last November, according to the Wall Street Journal.

Performance determines whether the Fed approves dividend increases and stock buybacks.

"Depending on the results of the stress tests, you will see increases in dividends," says Donald Lamson, counsel at Shearman & Sterling LLP, according to MarketWatch.

"The banks right now want to return capital to shareholders, because they want to maintain investor appetite for the shares." 

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

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