President Obama’s plan to impose a new $61 billion tax on banks is just another salvo in the war on banks, noted banking analyst Dick Bove told “The Kudlow Report” Monday.
“There’s no question that there is a war on banks and I think that you’re going to see headline risks for this group for a least the next 12 months, until the election is over,” he said.
In other words, bankers and banks are perceived to be evil, Bove said. Therefore, the risks in these stocks are “very real.”
Obama’s new bank tax is part of his proposed budget to Congress. It would be imposed over 10 years and is aimed at recovering the cost of the financial bailout and providing money to help homeowners facing foreclosure.
Bove has also been critical of the $26 billion settlement between the government and the nation’s biggest banks that would compensate homeowners whose debt exceeds the value of their properties and those who are alleged foreclosure fraud victims.
However, it's the Federal Reserve that's doing the most “damage” to the banks, he said. Because interest rates are being kept low, bank margins are under stress.
“Fortunately, the banks do have volume,” Bove said. “In other words, this is going to be a volume versus margin argument. And if volume continues to rise because loans continue to grow, they’ll offset what the Fed has done. The Fed is killing the banks.”
In fact, he thinks it’s very likely the banks will continue to rally, like they did Monday, because the positive is starting to overwhelm the negative.
“We’re seeing a big increase in lending, which is where the banks make their biggest profits,” he said.
Right now, Bove thinks bank stocks are still cheap. He particularly likes Bank of America , Citigroup , US Bancorp and JPMorgan , although he noted JPM is the bank that has the biggest risk in Europe at the moment.
-AP contributed to this report
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