Dick Bove: Banking Stocks to Disappoint This Summer

Wednesday, 25 Apr 2012 11:41 AM

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Banking stocks have been a good investment recently but they'll likely disappoint this summer, when the next round of quarterly earnings comes out, says Dick Bove, a banking analyst at Rochdale Securities.

Bove has been bullish on banks in the recent past, arguing that stock prices don't reflect the book value at many financial institutions, although fears the European debt crisis will rekindle coupled while seasonal factors will weigh on stocks.

"The European debt problems have arisen once again. The seasonal activity of the Federal Reserve is likely to cause the normal seasonal decline in stock prices," Bove says in a message to clients, CNBC reports.

"Thus, investors are likely to note continuous increases in bank earnings through the summer but no positive movement in bank stocks."

Over the long term, however, bank stocks are set to perform well.

"While I continue to believe that it will be difficult to make money in bank stocks this summer, I think these stocks will outperform the markets in the fall," Bove says.

"Therefore, my recommendation is to hold on to the stocks, buy them in small amounts this summer, but do not expect to make a great deal of money."

Other experts agree that financial stocks look good for the long run, including George Leong, a contributor to Profit Confidential, an investment e-letter written by financial experts.

"From growing businesses, real estate activity, and consumer credit, the reality is that the nation’s banks have steadily charted a recovery since the collapse of Lehman Brothers in late 2008," Leong says in a statement.

“This chaotic event in bank stocks was an opportunity that only appears once in a while.”


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