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Bank stocks to see 14-year bull market: Dick Bove

Richard Bove of Rafferty Capital Markets.
Jin Lee | Bloomberg | Getty Images
Richard Bove of Rafferty Capital Markets.

Banking analyst Dick Bove may have changed firms, but he hasn't altered his rosy view of the industry.

In fact, he has accelerated his bullishness on big financial institutions, predicting an unbridled 14-year run higher for banking stocks.

The former Rochdale Securities analyst met the media Wednesday for the first time since switching over to Rafferty Capital Markets, a small player in the field but one where he said he feels comfortable to continue his often outspoken analysis.

Rochdale was hit by scandal after a rogue trader made an unauthorized trade of nearly $1 billion on Apple stock, which triggered a federal investigation.

Following a year in which financials led the stock market higher, Bove said the industry is now in a position to continue that leadership role and reward investors who got hammered during the financial crisis.

"What I'm suggesting is for the next 14 years — you'll have some setbacks, some recessions — (but) bank earnings will do what they did from 1992 to 2006," he said. "They're going to go straight up."

"Investors in this industry obviously have to get out at the right point in the cycle, but they're going to make a great amount of money," he said.

Among his top picks are Goldman Sachs, Bank of America, JPMorgan Chase and Citigroup. In small banks, he likes PNC Financial, Comerica and Fifth Third, and recommends Lazard Capital, Greenhill and Evercore among advisory firms.

He cited a variety of reasons for his thesis, but primarily he simply expects bank earnings to continue to defy expectations as the U.S. economy recovers.

(Read More: Banks Could Have a Record Fourth Quarter: Bove)

That's a big switch just a few years after the industry imploded during the subprime credit crisis.

Bove provided a lengthy analysis breaking down individual bank earnings and stock performance, which shows that an investor who would continued to put money into big banks at regular intervals - dollar-cost averaging - following the crisis would have made money - not much, but still a profit.

"The point is, who would have thought that could possibly happen?" he said. "Who would have thought you could have made money buying bank stocks in these last four years?"

He cited the strength of bank balance sheets and expected growth across various industries such as real estate and electronics that will boost business. Investment banking and trading also will grow, he said.

While Bove has been a critical of earlier Federal Reserve efforts to boost liquidity and stimulate the economy, he praised the central bank's latest efforts.

In a move announced in November, the Fed said it will conduct an open-ended program that will be tailored at buying not only Treasurys but also mortgage-backed securities in an effort to help housing.

The first two efforts were called QE1 and QE2, but it is QE3 that he said will have an actual impact on the economy.

"QE3 harks back to a much earlier period in financial history," he said. "What the Federal Reserve is doing this time is taking the money and investing it directly into an industry — housing -— in the United States."

(Read More: Bove: Not Just Taxes, Not Just Feds.)

Bove dimissed concerns about tax policy, saying higher taxes historically have coincided with greater economic activity. Despite the recent tax increases and the 0.1 percent drop in gross domestic product, Bove said he expects the economy to grow at a 3 percent rate later in 2013.

Sales of automobiles, electronics and growth in medical care will help spur that growth, he said.

"Those things will drive the economy. What will not drive the economy is the government," Bove said. "Tax rates don't matter. They're totally irrelevant to economic growth."

—By CNBC's Jeff Cox

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