"What you're beginning to see is that all of this negativity—which has been pounding at these stocks for three to four years—is starting to lift because people are starting to realize that if you get through all the negative statements about the industry, the industry is making a staggering amount of money," Bove said.
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Bove listed several reasons for his bullishness on the sector: The U.S. banking industry is on pace for record profits in 2013, with low loan-to-deposit ratios, reduced loan-loss ratios, fewer bad loans, rising earnings quarter-over-quarter and "massive" historic over-capitalization.
"They are so liquid that their earnings are being negatively impacted by it," he said. "The only thing that can harm the banks right here is some weakness in the economy. Lacking that, bank stocks are very, very cheap."
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He also said that going by historical valuation, "it is not very difficult for a bank stock in normal times to sell at two times book value. There are virtually no banks in the United States selling at two times book value."
Names including SunTrust, Regions Financial, Morgan Stanley, Citigroup and Bank of America are selling at discounts to book value, he said. "There are no banks in the United States that will be selling at discounts to book value six to 12 months from now."
Bove predicted that both Citigroup and Bank of America "will at least get 100 percent higher than they are right now. … Now that's not going to happen in the next 12 months;it may not happen in the next 18 months, but it is going to happen."
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Citigroup has gone through significant structural change, Bove said, and "could easily do 100 percent from the current level."
With a rapidly appreciating sector—the XLF has risen over 35 percent in the past 12 months—investors can expect to see pauses and pullbacks, but these moves down represent buying opportunities, he said.
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"Remember, these stocks are not coming from normal levels," Bove added. "They're coming from highly depressed levels. Therefore, they're just getting back to normal levels of valuation."