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June 23, 2009 – Comments (1) | RELATED TICKERS: BAC , WFC

Richard Bove says get ready for big banks to bounce back - Barron's Online


Barron's Online did an interview with Rochdale Securities analyst Richard Bove. Here are some excerpts: " If you buy Citigroup (C) stock now, is it like buying Citi in the early '90s, when the business seemed doomed and the stock price was down around $2 a share? Bove: I think so -- as long as Citigroup is going to do well in the next few quarters. Q: And will they do better in the next four quarters? A: Well it depends. If you think we are going into a depression, Citigroup is not going to do well, and the rest of the American banking system is not going to do well. If you think that the economy is going to turn around, which I believe is the case by the end of this year, then the profitability of the American banking industry is going to be explosive on the upside. If it turns around, banks are going to see a fivefold increase in their net income... Q: Who else right now has the brightest future, particularly in terms of stock price? A: Bank of America (BAC). Think about this. In 2006 Bank of America wrote off about $5 billion of bad loans. In 2007 I think they wrote off $8 billion, and in 2008 they wrote off $24 billion. This year they'll write off -- I'm estimating $46 billion. Again, in a decent economy you are not going to be writing off $46 billion. That number will go back down to somewhere around $4 billion or $5 billion a quarter. That's $41 billion in loan losses which go from loan losses to pretax income, and triples, quadruples Bank of America's earnings. The stock is going to go back to $35 a share as far as I'm concerned."

1 Comments – Post Your Own

#1) On June 23, 2009 at 11:38 AM, IBDvalueinvestin (98.53) wrote:

Banks should rally the next 2 days after a massive sellof in banks the last 5 days.

Rumors are speculating that the FED. will indicate on Wed. that interest rates will not be lifted in 2009. This should push bulls into banks , which will cause a short-term short squeeze.

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