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 , and pointed out notable discounts in book value in five stocks:
- Citigroup ()
- Bank of America ()
- SunTrust ()
- Regions Financial ()
- Morgan Stanley ()
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 () 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 (, +43%) and Wells Fargo (
, +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 InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.
Related Reading
- Dan Burrows likes a lot of the banks Bove does, and why not?
- Portfolio Grader recommends buying these 23 banking stocks.
- Tim Melvin believes you can find value in smaller bank plays.
