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Bove’s Top Banking Picks
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Richard Bove, financial strategist at Rochdale Securities, is bullish on the US banking sector as he sees an improvement in banks' overall operating businesses.
Bove has a "buy" rating on JPMorgan Chase [JPM
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], Wells Fargo [WFC
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] and Goldman Sachs [GS
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]. Neither he nor his company have holdings in any of the companies' stocks.
"If the equity market continues to rise, you'll see big increases in equity offerings," he said Tuesday.
When asked why his outlook differed from more bearish peers like Mike Mayo and Meredith Whitney, Bove told CNBC that there are a number of factors that contributed to his bullishness.
"What I see is operating earnings as being relatively strong … I don't think the loan losses are going to pull the operating earnings down as far as Mike (Mayo) and (Meredith) Whitney do," he said.
Bove said he sees a huge increase in deposits occurring in the American banking system.
"The cost of the money coming into banks is less than one half of what it was a year ago. So not only are they getting these deposits, but they're getting them at extraordinarily low rates," Bove told CNBC.
Other factors that add to Bove's optimism on banks are the recent mortgage refinance boom and that the securities complex is unlikely to cause more big writedowns like it did a year earlier.
"Your costs are coming under control because of the contraction that occurred in their businesses over the past couple of quarters," he added.
Bove said there are lots of reasons why Goldman Sachs had "pretty good numbers for quite a while," which include:
1. "Their core business, which is trading, did extraordinarily well;"
2. "The competition has gone away;"
3. "Goldman has pricing power – Basically because there's so few competitors, or weaker competitors, Goldman has actually doubled the price of transactions in the first quarter;"
4. "There was more activity in the currency markets, the commodity markets, the fixed income markets, and at the end of the quarter, just in the month of March, you started to see some improvement in their equity operations."
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Data is a real-time snapshot *Data is delayed at least 15 minutes
