Bank stock prices have dropped in four of the last five years, according to Odeon Capital Group’s Dick Bove.
Their stock prices have slumped in four of the last five years, according to the calculations of veteran bank analyst Dick Bove, chief financial strategist at Odeon Capital Group. Over that five- year period, only four of the 106 banks he follows have outperformed the S&P 500.With big banks’ third-quarter earnings reports coming up later this month, we interviewed Bove to get his views on the industry. Here is what he had to say.
But they became that, because the president said the government would guarantee all deposits at all banks. That’s impossible. The government realized that if it didn’t reduce the risk of banks to the government, then at some point there would be a massive problem the government can’t deal with. It can’t go to the Fed and say, “create $2 trillion.” The government is trying to shrink banks., using government-approved accounting, has $17 trillion worth of securities.
Now, the Fed can unwind, so it has reduced its balance sheet by almost $1 trillion in the last 18 months. They have gone from exploding money supply to reducing it. That’s never happened before. Banks can’t hold on to the money [of depositors]. The yields on their assets aren’t high enough to allow them to pay depositors a market rate. There’s a multiplier effect in the wrong direction. It’s affecting mortgage, auto and credit card loans. It’s having a massive impact on banks.Banks are in trouble because of the government, which no longer likes the structure of the banking system. It’s moving aggressively in the wrong direction. The risk is shifting to the government.
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