Dick Bove: Investors Distracted by JPM, Missing Opportunity
The headlines may be all about JPMorgan and Jamie Dimon’s testimony before Congress, but widely followed bank strategistDick Bove of Rochdale Securitiessays, the horse and pony show is diverting attention away from something much more important.
Bove says forget about Dimon’s appearance before Congress and those outsized bets made in the derivative markets, resulting in an unexpected loss of at least $2 billion.
“Who cares about the size of the loss – JPMorgan makes more money than any other bank in the world,” said Bove on CNBC’s Fast Money. “What matters is that there are only 5 companies in the entire US that make more money than JPMorgan.”
And Bove goes on to explain that even if the loss comes in twice as big as expected or $4 billion, it won’t hurt JPMorgan’s bottom line in any meaningful way.
“Assume JPMorgan earnings are knocked down 25% - it will still be one of the 12 biggest earners of any company in the United States. And right now it’s trading at a discount to book – that makes no sense whatsoever.”
But JPMorgan aside, Bove tells us what investors really need to know is that it’s never been better to be bank - any bank.
“Banks are flooded with deposits; banks have increased prices on every non-interest product that they’re selling. Also, they’re seeing reduction in operating costs and reduction in loan losses. Absolutely everything is going right.”
“And in the last 11 quarters earnings for the industry have been up year over year.”
All told, Bove thinks banks a cheap and very profitable.
Top trader Karen Finerman sits on the desk of CNBC's Fast Money. “I’d like to think he’s right,” she says.
However, Finerman doesn't think it's prudent to draw conclusions until JPM reports earnings. “I think that will be the next catalyst," says the president of Metropolitan Capital. "The Street needs to understand the extent of the losses and whether Dimon has gotten them under control.”
Trader Mike Murphy agrees. “I don’t know why you would put money to work in this stock, says the founder of Rosecliff Capital. “There may be a train coming. I wouldn’t jump in front of it.”
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Trader disclosure: On June 13, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour is long BAC; Tim Seymour is long INTC; Tim Seymour is long SBUX; Brian Kelly is long UUP; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM calls; Karen Finerman is long M; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Dan Nathan is long AAPL; Dan Nathan is long BAC; Dan Nathan is long JPM; Dan Nathan is long MS; Dan Nathan is long IBM; Dan Nathan is long RIMM; Dan Nathan is long WMT; Dan Nathan is long FB
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