Monday, August 31, 2009

Bove On Banks: Short-Term Bear, Long-Term Bull

From MarketBeat:
...The best news, surprisingly, comes with home equity lines of credit, where
many homeowners seem willing to pay “even when their homes might be upside down in value.” Big upside to the tune of 300%-500% earnings growth coming for
banks…but not until 2011-2015, Bove concludes....MORE

From Clusterstock comes a slightly more detailed version:

Bove: What Was All That Hysteria About Banks About?

...OK. So things are still a little bit on the eh-side, but give it some time,
and bank earnings will grow by 300% to 500% from 2011 to 2015, he says.

“The swing factor in bank earnings has always been and will always be loan quality.
In recent years, the deterioration in loan quality has destroyed bank earnings
and management credibility. This pressure will continue through the remainder of
this year. By the second half of 2010, loan quality could begin to improve based
on an expected improvement in the economy and some signs that unemployment has peaked. Banks earnings will begin an unusually rapid climb at that time. The expectation is that earnings will grow by 300% to 500% from 2011 to 2015.”

Also, could people please come to an agreement for valuing banks? When that whole
“hysteria” gripped the nation, everyone was all about that tangible common equity business. Then, when people started to relax a bit, valuation metrics changed and banks were to be valued on their normalized earnings. But that didn't help either....MORE