Dick Bove Says Bank Stocks Look Ugly, Cuts Citi and Goldman
Dick Bove Says Bank Stocks Look Ugly, Cuts Citi and Goldman
(Bloomberg) -- Bank stocks are “unattractive” as coronavirus and trade war concerns are escalating, Odeon analyst Dick Bove wrote in a note cutting his ratings on Citigroup Inc., Goldman Sachs Group Inc., Regions Financial Corp. and Truist Financial Corp. to hold from buy.
Bove in a note flagged hits to consumption and production in China from the new virus, along with global moves to protect people, which have slowed economic activity. He also warned that “trade issues have not been resolved,” as U.S. tariffs are still in place and Brexit is underway. He added that the Federal Reserve has moved to shrink its balance sheet, commercial loan growth is still weak and business leaders’ confidence is slipping.
“I am concerned about the banking group because unless the economy is more robust than I think, it is likely that these companies are facing a very difficult set of commercial and banking problems,” Bove said. He added that it’s “very difficult to see how bank earnings will increase in the first quarter and perhaps the first half of 2020.” Banks stocks “desperately need” a better economy, more loan activity and higher loan spreads in 2020, he said.
Stocks with buy ratings -- including an upgrade for JPMorgan Chase & Co. and existing recommendations for Bank of America Corp. and SVB Frinancial Group -- “have been selected primarily because they have unique business models, are acquisition targets, or will benefit from non-economic events,” Bove said.
Bank stocks rose in Monday morning trading, with JPMorgan gaining as much as 1.3%, BofA up as much as 1.6%, Citigroup climbing 2.4% and Goldman rallying 2%. U.S. stocks across the board rebounded after a gauge of U.S. manufacturing in January beat estimates and signaled growth in the beleaguered sector for the first time since July.
Bove in January raised his rating on Goldman to buy as the firm had a “well thought out” plan for building the business. Last week, the bank’s new leaders gave investors an unprecedented look under the hood for a firm that scoffs at even displaying its name on its headquarters, laying out a plan that could leave it looking more like an everyday bank.
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm
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