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Dick Bove bullish on banks after stress tests

Bove: Banks' all-time record earnings

Financial stocks have room to double from current levels, Dick Bove said Thursday on CNBC.

"I think the first thing that should be understood is that the industry is at all-time record earnings," the Rafferty Capital Markets bank analyst said on "Fast Money."

"Secondly, the balance sheets of these companies couldn't be better. They've got more capital as a percentage of assets than they've had going back to 1938. They have more liquidity on their balance [sheets], which is at 40-year highs," Bove added.

(Read more: Dick Bove sees recession , 7 percent rate ... in a few years)

Dick Bove: Banking headed 100% higher

"If you take a look at things like their loan-to-deposit ratios, they're also at 40-year lows, which means if you would think of a bank balance sheet as a factory, this factory is running at around 65 to 70 percent of capacity, which means that the ability to show significant increase in earnings from this level is enormous because the money is there to do it. The economy apparently is going to do relatively well this year, which means that the loan volume will pick up."

(Read more: Fed says 29 out of 30 banks meet stress test capital requirements)

Bove also said that based on what Federal Reserve Chair Janet Yellen said this week, "maybe there's a chance that there'll be some increase in interest rates."

Bove's top pick in the sector was Bank of America.

"I still think the stock is going to go to $30," he said.

(Read more: Bank stocks to double: Dick Bove)

Citi's upside: Trader

Continuing to use the analogy of financial services as widgets manufactured in a factory, Bove said the outlook for banks was good.

"So, they're going to sell more widgets at higher margins. They're going to do it on balance sheets that are highly liquid, overcapitalized. They're in a position to increase their dividends, not just this year but for the next three, four, five years," he said.

Valuations were also key. "The stocks are selling at premiums to book value, which are so low relative to history, that there is significant opportunity for at least them to double from this level," Bove said.

Bove also said he expected that bank lending would be greater than at any time since 2007.

"I think we're looking at a capital expenditure boom in 2014," he said. "I think that housing should creep up a little bit. I think that auto sales are going to be a little better. I think that the energy sector is going to utilize more funds. I think there's going to be an M&A explosion this year. That's where the widgets are going to go. The widgets are going to go to funding all those events."

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.