Bove: Banks are now like tobacco, asbestos firms

Continuing legal expenses have put big banks in the same league as tobacco and asbestos companies, Rafferty Capital's Dick Bove told CNBC on Wednesday.

"Legal expenses will stay high for the industry, and they'll stay high for quite some time because all the rules have not yet been written for the industry," Rafftery's vice president of equity research said in a "Squawk Box" interview. "I think the industry has been nationalized effectively by the U.S. government, and the U.S. government is pressing hard on the profitability of the banks."

Investors came to expect that legal costs for asbestos and tobacco companies would become relatively high, and that pattern is taking hold in the banking industry, Bove said. He noted that thousands of lawsuits are pending for big banks. At the same time, they are subject to the cost of regulation.

On Wednesday, JPMorgan Chase reported earnings well below consensus estimates and greater-than-expected legal fees of $1.1 billion. Bove said investors can no longer think of these legal costs as one-off charges.

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Bove took issue with a recent Goldman Sachs report that concluded JPMorgan should think about breaking up its business, in part to deal with the current regulatory landscape.

He called the report "self-serving" and "probably one of the worst things that Goldman Sachs has written in a long time."

"If they don't believe that big banks should be broken up—and they don't—they only believe that their competitors should be broken up, I don't think that's pretty good research," he said.

Last week on "Squawk Box," Goldman CEO Lloyd Blankfein declined to say his own bank should be broken up.

"It's very good for him to say, 'Gee, I think my big competitor should be broken up, but I shouldn't be broken up, because obviously there's no advantage to keeping me together and breaking up all my competitors, right?" Bove said.

Goldman Sachs did not immediately respond to a CNBC request for comment Wednesday.

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Investors should ask themselves why big banks do relatively well and the U.S. loses the equivalent of one bank every day.

"What is the economics which drive all of these other smaller banks out of the business and keep theses big banks in business? The answer is very simple. The big banks have economy of scale, they bundle their products, they offer more services at lower prices, so the consumer benefits, whether it's a corporation or an individual from what the big banks do," he said.

Breaking up big banks would increase the cost of banking to consumers and corporations, he concluded.