Homepage / Investment / Prominent analyst Dick Bove says new leadership at banks is needed: They've 'lost their way'
Best Alternatives of VPN Software New Step by Step Roadmap for Marijuana News Privately owned Internet Access Avast Review Powerful Deal Achievement Top Rated Free VPN Services Adaware Review – Is Adaware Review Right For You? Ideal Legit Snail mail Order Bride-to-be Sites To Decide On In 2023 & Feedback Thailänder Brides Pleasant Thai Mailbox Order Wedding brides To Marry Tes Powerful Interracial Marriages Exquisite Interracial Lovers How to begin a Successful Wife Search Getting married to a Russian Child The right way to Meet Delightful Ladies Around the World To recognize Know About Ukrainian Single Girls Dating The Different Types of Sugar Daddies The key benefits of Dating a Latina Top 5 International Dating Sites Russian Women Seeking Men Overseas Cookware Interracial Lovers and the Backlash Against All of them Getting the Marriage License and Wedding ceremony Done Correct How to pick the Best Web based Marriage Company Delightful Interracial Lovers Crucial Russian Females Dating Suggestions for Men Top five Romantic Honeymoon Destinations Just what Soulmate? Web based Relationships Suggestions Setting Expectations just for Online Sugar Daddy Arrangements Marital relationship License and Ceremony Why Are Latinas Heated? Getting Foreign Bride-to-be Tips on how to Propose — What’s the Best Way to Say “I Do”? Dating Etiquette — The Modern Rules of Seeing A Quick Guide to the Use of NLP in Chatbots How you can Have a cheerful Marriage The right way to Fix a Relationship With out Hurting Your companion How to Spice Up a lengthy Distance Relationship The main advantages of Online Dating What is the Best Female Race to Marry? Western european Women Stereotypes Why Asian Girls Like Bright white Guys How to Succeed in On the web Relationships Top 5 Online Connections Tips Top 5 Online Connections Tips Leading Countries With Best Foreign Brides Powerful Interracial Relationships Asian Wedding Icon Meanings Where to Find a Deliver Order Star of the wedding For what reason Asian Girls Like Light Guys Asian Brides Via the internet 5 Latina Wedding party Traditions Will possibly not Have Dreamed about When should you Stop Online dating Other People in Online Dating Latina Relationship Interaction Styles How to Find a Bride On line Good Interracial Relationships Oriental Wedding Practices Top five Online Relationships Tips The right way to Meet Overseas Woman and Create a Longer Distance Romantic relationship Where to Meet Latina Mail Buy Brides Where to get a Hot Asian Star of the event Precisely what is the Best Female Race to Marry? Mixte Marriage and Asian Ladies Mixte Marriage and Asian Ladies Mixte Marriage and Asian Ladies Handling Modern and Traditional Principles in Oriental Relationships Cookware Woman That Want to Marry Browse Online Dating Websites Reviews Ahead of You Subscribe What Country Offers the Best Wives? Singaporean Wedding Customs – Blending Tradition and Modernity Effective Interracial Partnerships Ways to Express Take pleasure in in a Long Distance Romantic relationship Marriage ceremony Tradition in Thailand Damaging Communication in Relationships The Best Place to Meet a very good Woman Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement

Investment

Prominent analyst Dick Bove says new leadership at banks is needed: They've 'lost their way'

With banks showing they’re at perhaps their best health since the financial crisis and ready to return heaps of cash to investors, it would be natural to expect a little more market enthusiasm.

Instead, the sector has stumbled through the year, the luster of its “Trump trade” status wearing thin and even the prospect of higher interest rates doing little to stoke more buyers.

That sets up an interesting scenario this week: The second round of stress test results will be announced Wednesday, the likely result of which will be most or all of the banks involved gaining approval for their plans to return capital to shareholders. The first round of testing found all 34 banks holding capital above the minimum requirements.

At least 10 banks are expected to announce they’ll be releasing more than 100 percent of earnings in buybacks and dividends.

And some people aren’t very happy about that at all.

“These companies have completely lost their way … They have no vision, they have no concept of how to grow these businesses,” Dick Bove, the vice president of equity research at Rafferty Capital Markets, said in an interview. “They have no idea how to use the capital they’ve been entrusted with.”

Lacking ideas about how to grow their institutions organically, banks are boosting their stock prices by simply shoveling back cash to shareholders. However, even with the prospect of that cash coming back, investors remain cool to bank stocks.

The sector is down more than 2 percent over the past week, though it made up some of the losses in Monday trading. For the year, financials are up a bit more than 3 percent, well behind the S&P 500‘s return of around 9 percent and good for the third-worst performer among the index’s 11 sectors.

Bove said the bank’s leaders are to blame for the weak performance not only in share price but also in overall performance.

“Banks are selling the perfect no-growth strategy — i.e., we have no idea as to how to grow our businesses so we are giving away shareholders money primarily to people who do not want to have anything to do with us,” he said in a separate note to clients.

The industry, he added, is piloted by “bank executives [who] may be the most inarticulate group of company leaders in history … This industry needs new leaders who can shape the visions and implement the strategies to grow.”

Bove wouldn’t name names of individuals he thinks have overstayed their welcome.

Other industry experts, however, see the problems as reaching beyond the boardroom and into the halls of Congress and the Federal Reserve, both of which put tight reins on banking after the damage done during the financial crisis.

“The Street has turned the [stress test] process into a way of justifying greater cash return, and I’m not sure that’s appropriate,” said Christopher Whalen, head of Whalen Global Advisors. “But this is the house the Fed has built, so they have to live in it.”

Indeed, the Fed is the final judge over the capital proposals. While the central bank has been vocal in terms of its desire to make sure banks are safe, the thinking is that most if not all the tested institutions will get the OK this time around.

Former FDIC Chair Sheila Bair worries about the Fed’s willingness to approve the capital plans. In a post for American Banker, Bair said she “would advise extreme caution for payouts in excess of earnings,” reasoning that for some banks the capital returns might not leave enough left over should a crisis hits.

Still, Keefe, Bruyette & Woods estimates 11 banks will get approval to dispense more than 100 percent of profits — a significant landmark for the businesses to begin dipping into their cash stockpiles. Banks have $2.11 trillion stored at the Fed in excess reserves alone, a number that is just shy of $2 trillion more than required.

The big cash return “is the upside to the view by many investors that banking is becoming a utility!” KBW analyst Fred Cannon said in a note.

“In our view the best strategy for most banks is to establish a sustainable regular dividend that can be increased over time and a share repurchase program that returns capital in excess of investment opportunities and dividends to shareholders,” Cannon added.

As long as banking is treated as a utility — Bove contends the industry has been effectively nationalized — the hopes for organic growth may go unfilled, at least for the largest institutions.

“I think it is very limited. M&A is the only way you can show top-line growth, but the deals aren’t obvious,” Whalen said. “The curse of regulation is that you can”t innovate. None of these big banks or big financials generally can really be that flexible in how they run their businesses, because they have this top-down template form the regulators. They are forced to run their businesses to suit the regulatory environment.”

Watch: Dick Bove gives his advice on which banks to buy after the stress tests.

Source: Investment Cnbc
Prominent analyst Dick Bove says new leadership at banks is needed: They've 'lost their way'

Comments are closed.