Dick Bove: Buy Banks, Avoid Brokers

"Bove Says Bear (BSC) Holder Lewis Won't Find Alternative Deal."

Interesting interview with Dick Bove, the Punk Ziegel analysts who has been so dead right about the banks and brokers this past year:

Richard Bove, an analyst at Punk Ziegel & Co., talks with Bloomberg's Carol Massar and Julie Hyman about the outlook for financial markets, brokerage and bank earnings, and the possibility that Bear Stearns Cos. shareholder Joseph Lewis may push the company to consider alternatives to the $339 million buyout offer from JPMorgan Chase & Co. (JPM).

Comments

[Wall StreetQuant]

Bove has not been dead right. He made the bearish call last August and has lived off of it. Shortly afterwards he became bullish. He called C the buy of the century when it was trading over $30. On 12/14/07 he said in reference to C "The dividend is not going to be cut. It is not even remotely possible that the dividend will be cut." Then he went on to say that bank dividends were not going to be cut and would actually INCREASE in 2008. That is not even a remote possibility.

He was on Bloomberg a little over a month ago and recommended that people buy LEH because they are thriving from the increase in refinancings. In case you haven't noticed refinancings spiked for about two weeks and have since plummeted. Great call Dick.

That is nothing compared to his recent recommendation to buy BSC. Yes BSC. Amazing that none of this was mentioned by CNBC.

Instead CNBC decides to put their spin on this by stating Dick Bove had JUST BECOME bullish. That could not be further from the truth.

[User 108022]

I agree with GSH1076. Listening to Bove's public announcements would have led to purchases of both LEH and C months ago.

[Fuzz]

Barry Barry Barry
Bove called BSC a "market perform" on March 11. Monday morning XBD opened down 9.75%. BSC opened down 95%. Who you crappin'?

[BlackSwan]

Mr. Bove not only said late last year that Citi would not cut their dividend, but they would increase it in 2008 as a sign of strength. He has been recommending purchase of Citi since it was in the mid-thirties. I suspect his bearishness on Dimon's purchase of BSC will prove to be equally wrong. I should think that if Citi isn't substantially higher by mid or late year, Mr. Bove's career will be over, or, at least, deserve to be over.

[BxCapricorn]

Richard Bove was wrong, but today 7/14/08, he did help number crunching investors with this insight by CNBC...

"In a report, he looks at all the FDIC-backed institutions, comparing each bank’s bad loans to its overall assets through two ratios. First, he divides the “non-performing assets” of an institution--bad loans, late loans, foreclosed assets--by all of its outstanding loans. “A ratio above 5 percent suggests danger.” The overall industry ratio is below 2 percent. That’s good news. But it’s not so good for individual names like Downey Financial (DSL), with a 13.86 percent ratio (on Sunday, Downey Financial reported its non-performing assets were over 14 percent, up from 1 percent a year ago). Other names in the “danger zone” are Corus Bankshares (CORS) at 13.18 percent, Doral Financial (DRL) at 12.82 percent, FirstFed Financial (FED) at 6.73 percent, Oriental Financial, BFG at 6.12 percent, and BankUnited Financial (BKUNA) at 5.36 percent.

Then Bove ran a second set of numbers dividing a bank’s non-performing assets by its reserves plus common equity. “A ratio about 40 percent is the danger zone.” This is where it gets interesting. You have all the same names as listed before, plus Washington Mutual (WM) which comes in with a ratio at 40.6 percent. Bove calls this being “on the edge” of danger but not quite there yet."

That could be something an above investor could use. For those that are simply worried about their banks, see your bank's rating at

bauerfinancial.com