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Bove Sees Big Value, Potential Doublers in Bank Stocks

Noted bank analyst thinks BofA, Citigroup could explode higher


The financial crisis of 2008-09 that blasted bank stocks might not be completely in the rear-view mirror, but Rafferty Capital bank analyst Dick Bove certainly thinks the worst is over.

Bove believes investors should be buying financials “very aggressively”, and pointed out notable discounts in book value in five stocks:

  • Citigroup (C)
  • Bank of America (BAC)
  • SunTrust (STI)
  • Regions Financial (RF)
  • Morgan Stanley (MS)

And Bove likes BofA and Citigroup specifically to at least double … not necessarily in the next 12 to 18 months, but “it is going to happen,” he says.

No doubt about it: Bank stocks are back in favor as they continue recapitalizing balance sheets, taking advantage of ultra-low borrowing rates at the Fed window to increase margin spreads, and making the occasional — and usually very profitable — hedge bets on stock and bond positions.

The results have been record profits, increases (and even reinstatements) in dividends, and soaring stock prices. The broad-based Financial SPDR (XLF) is up a screaming 37% in the past 52 weeks, led by individuals like Bank of America (+83%) and Citi (+77%). Not to mention the other two Big Four stocks — JPMorgan (JPM, +43%) and Wells Fargo (WFC, +27%) — are up strongly in that time, and both also increased their dividends by double-digits during the year.

Bove believes the banking sector is headed for continued record profits through the remainder of the year as reduced loan-loss ratios and lower bad-debt write-offs boost earnings forward.

I admit to being a laggard when it comes to the sector, but perhaps a second look is worth the while — whether it’s for the growth predicted by Bove in BofA and Citi, or for the nearly 3% dividends in Wells Fargo and JPM.

Marc Bastow is an Assistant Editor at As of this writing, he did not hold a position in any of the aforementioned securities.

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