Big Banks Looking Good, Regionals to Take Hit: Bove
Strong trading activity will help the big banks post handsome profits in the coming quarters while their smaller counterparts will continue to languish, banking analyst Dick Bove told CNBC.
Commercial real estate damage and the need to build reserves will cause about 60 percent of regional banks to post losses, the Rochdale Securities analyst said in a live interview.
"They're under-reserved, so you're going to see a big jump in reserves," Bove said.
Conversely, strong activity in fixed income and capital markets will boost some of Wall Street's biggest names.
"We're seeing a widening of the activity in the fixed-income market, particularly with issuance by new ... offerings," Bove said. "Where you should put your money from my perspective is Goldman Sachs and Morgan Stanley."
In addition to Goldman and Morgan Stanley he also said JPMorgan Chase will benefit from strong trading even though its traditional banking side has suffered losses. He also mentioned Lazard and State Street.
Bove also reiterated positive statements about Bank of America . While the company still faces some losses, investors should look forward on BofA, which he said he expects to see losses reduced dramatically in the coming years.
At the same time, he cautioned that troubles at the Federal Deposit Insurance Corp will eat into all banking earnings, but particularly the bigger names that will have to increase their premium payments. FDIC premiums could consume as much as 25 percent of bank earnings, Bove said.
He also addressed the lack of bank lending, saying institutions are stockpiling money received through the government's Term Asset-Backed Loan Facility program. Banks have put most of the TALF money in the Federal Reserve "until they know what the political landscape" is going to be for their operations.