Tuesday, November 15, 2011

U.S. Banks Benefiting from European Crisis

Fears over the European debt crisis sent the market lower Monday, with financial stocks leading the way, but Rochdale Securities' Dick Bove said that what’s happening in the euro zone is actually helping banks.

“The irony of what’s going on right now is that the banks are benefiting at the moment from what’s going on in Europe,” he said on The Kudlow Report. “The European banks are selling American assets to American banks at discounted prices which is creating a benefit for the American banks.”

The fact of the matter is banking companies are in pretty good shape, Bove noted.
U.S. banks, however, are flush with cash and therefore there should be no fears over funding issues, Bove said. In fact, he thinks they are overcapitalized.

“If you take all the numbers going back 75 years to when the FDIC was first created,” he said, “we’ve never had this high a level of capital plus reserves as a percentage of assets in the banking industry, ever.”

Plus, deposits are pouring in because when people are afraid of what’s happening in the market, they put their money in the bank.

“The banks have too much liquidity right now, too much capital right now,” he said. “There is no funding issue.”

What banks are Bove’s picks? He likes JP Morgan Chase, U.S. Bancorp, and Morgan Stanley.