BxCapricorn

Dick Bove: Buy Banks, Avoid Brokers

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

How Bear Died

I'm interested in reading it, but to conserve paper...

www.vanityfair.com/pol...