You're watching...
Rafferty Capital Markets bank analyst Dick Bove on why he sees a bullish outlook for banks.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
So are -- back record a new report by legendary banking analyst -- -- -- -- fourteen years are going to be great for some of the biggest banks bottom lines.
So why many other analysts painting such a different picture for the banking sector.
And the banks of the fifteen year that's my question.
We -- joined by the man himself Dick bove a banking analyst extraordinaire with rap pretty capital markets -- great to have you back on the show.
Thanks for coming on Jerusalem.
Let us you know explains copper -- hedge with fourteen years.
Well if you take a look back capacity for our -- in banking history the average up cycle for banks is fifteen years.
-- had a real long one from 1959 and that one -- 126 years.
And you had another long one in nineteen 89.
Which lasted for seventeen years.
And we're now four years into this up one because you know the industry's earnings turned -- very strongly in 2000.
910.
And so my my guess is that you know you looking at the same type of -- cycle that you sought as they say and in the prior cycles.
That this a lot of good things happening and in 2012.
If my estimates are right bank -- banking industry should at 22% increase in earnings and -- the industry may have earned.
A 145 billion dollars which would have been.
The second highest ever and in the fourth quarter of 2012.
-- looking at something on the order of you know 39 billion dollars and earnings which was in fact the highest ever.
-- -- -- we this eat even when you look at just didn't just to -- a little bit even when you look at what happened at JPMorgan they've still managed to post record earnings when they had.
You know what a lot of people -- was a disaster with a Atlantic whale incident they're right back.
I'm fixing things that you say in the report is that we need to start looking at banks and a different way look at them like companies like apple where -- -- -- their products and what the demand is like for them.
Why do you think that's the way to look at.
On the banks now.
What -- exactly right now there was basically when you look at accompany you to talk about apple and you didn't mention what they were doing in terms of selling iphones and ipads people would think you and that's right.
If you look at banks and you don't to think of what they're doing in terms of making mortgage loans and auto loans and loans too on consumer electronic products which is credit card loans.
If you know looking you what they're doing in lending money into the energy industry into the medical care sector into the -- the industrial sector.
You know you that -- getting what it is that they sell.
So number one and what what I expect to see in 2013.
And beyond.
Is increase in loans to all of those sectors and I agree with your prior guess who said that interest rates should go up.
Because if interest rates go up in the margins on these loans are going to be bigger so.
You -- think about it very simplistic previous selling more widgets in the doing it had a wider margin and therefore earnings are gonna go up to dividends are gonna be raised in.
You know in -- you gonna get a whole bunch of dividends being increased.
On these stocks -- you gonna get big stock buyback programs.
Being announced and and the other thing that we noted is that if these stocks sell it less than one and a half times book.
-- you buy them going back 22 years that's been the strategy that has always yielded significant increases -- -- carve out those point that you made because a lot of people said the resort banks are doing so well right now as because the Fed is so accommodating but you think even if interest rates go up eight despite awaited turnaround make money out that.
That -- basically banks have to make higher margins in periods when interest rates are rising right.
And if the Fed has not been accommodating to the banks in other words it's driven interest rates so low.
That it's really pressuring the bank's net interest margin.
In addition to which because interest rates are so low.
I'm gonna say -- rod senior citizens of their retirement funds because you know nineteen and a half percent of the income of the United States.
Prior to these interest rate cuts was in passive in yeah that's -- -- well.
No you're actually not -- we had guests of the beginning of the show making that exact point that this whole arrow with the Fed has been so bad for seniors and savers in people who are trying to retire.
I wanna mention a couple of analysts -- disagree with -- you didn't see your reaction to that.
That had a bank research over Evercore Partners in -- -- says.
That he thinks that we are set for pods in the bank stocks.
Jim Senegal bank of Banc analyst at Morningstar says as far as earnings go.
There are no real areas for huge improvements in the banking stocks what do you think about that.
Aren't they said it might well I think that will want them.
You know agreements you know the people have been arguing quite before -- is that banks couldn't do well right now the with Ukraine turn on.
If you will television station pick up an analyst's report talked to a portfolio manager who wouldn't tell you how terrible the situation was for banks.
They had to raise the capital they had to bring in more liquidity they had to do with price fixing they had a right 800 dollars with a bad loans.
They had increased regulations in yet despite all of these events.
You know they -- as in -- -- industry should.
Dick let's do you know England would you selling your fifteen and that's it get out cash out you think it's over.
Are.
-- yeah I think there's I know we didn't -- later is no -- -- You have this no waited to stuff financial collapses in fifteen years from now who britches will be another line I'm -- like under -- -- thanks for coming on.
Thank you.
-- so --
