Monday, September 13, 2010

The Bizarre Story of one of the Best Bank Analysts in the Business: Dick Bove (BBX; C; BAC; USB; WFC)

BBX closed Friday at $0.92.
Based on the emails we receive, Climateer Investing readers are smart, funny and good looking.
The last thing I would want to do is waste their time, so I try to use sources that know what they are talking about.
Bove is one of them.
We have his thoughts on Citigroup after the jump.
From the New York Times:
The Loneliest Analyst
RICHARD X. BOVE is a bank analyst who likes to take what he calls “extreme positions.” He occasionally moves the stock market, which has earned him a certain amount of prestige and notoriety — but has also gotten him fired several times.

One recent Tuesday morning, for instance, Mr. Bove opined from his bright-orange home office, in this town just north of Tampa, that new government rules would curb mortgage profits and, therefore, bank profits, too.
It wasn’t a particularly extreme pronouncement, by Bove standards. Yet shares of Wells Fargo, the nation’s largest mortgage lender, started to drop, and his phone lighted up.
“That’s what makes the game fun, right?” he says.

But for the last two years, Mr. Bove has been engaged in a lonely legal battle to retain his ability to say whatever he likes, an ordeal that he says has been anything but fun. BankAtlantic, a Florida bank, sued him, accusing him of defamation after he wrote a report about the banking industry in July 2008, just as the financial crisis was starting to boil over. The bank contended that the report falsely suggested that the institution was in trouble.

The case was settled three months ago , and Mr. Bove didn’t pay a dime to BankAtlantic. Still, it was hardly a resounding victory for Mr. Bove or, for that matter, freedom of speech on Wall Street, where some say the need for independent, probing voices has never been more apparent.
Although Mr. Bove is among the best-known analysts on Wall Street, most of his colleagues deserted him after BankAtlantic filed its suit. None of the professional associations that represent analysts or the securities industry rallied to his side, and his employer ultimately abandoned him. And Mr. Bove, 69, is stuck with nearly $800,000 in legal fees.

“Even though from a legal standing I won, from a real-world point of view I lost big,” he says.
The Bove report that led to the lawsuit, titled “Who Is Next?,” ranked 107 bank companies from riskiest to least risky, using two financial ratios as benchmarks on two lists. BankAtlantic Bancorp, the publicly traded holding company that controls BankAtlantic, was ranked 10th on one list, 12th on the other.

Alan B. Levan, the chairman and C.E.O. of BankAtlantic Bancorp, has often clashed with disgruntled investors and critics in his 40-year career in Florida real estate and banking. He says he filed his suit against Mr. Bove to protect his bank’s reputation.

“In the last three years, every business in America has been under extreme pressure because of the economy,” says Mr. Levan, 65. “In that kind of a scenario, when rumors begin that are inaccurate or portray a business in a light that is not true, then, in times of stress, companies need to correct those misconceptions immediately because otherwise it can become quite dangerous.”

As it turns out, however, Mr. Bove’s rankings have proved to be largely correct. On the first set of rankings, 8 out of the 20 companies he said were most at risk have failed, and most of the others’ stock prices have spiraled downward and remain low. On the second list of rankings, 9 of the top 20 banks are gone....MUCH MORE
Here's BankAtlantic's last earnings report:
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--BankAtlantic Bancorp, Inc. (NYSE: BBX) today reported a net loss from continuing operations of ($51.3) million, or ($1.02) per diluted share, for the quarter ended June 30, 2010, compared to a net loss from continuing operations of ($38.4) million, or ($2.54) per diluted share, for the quarter ended June 30, 2009.....
Here's the chart since July 13, 2008 (the day before the report was issued) a trend appears to be emerging:

Here's Bove's July 14, 2008 Ladenburg Thalman report:

Views on the Banking and Security Sectors

Here's Bove on Citigroup: 
So, Mr. Bove, what's your thinking on Citigroup?