|Could bank stocks grow 100 percent in value? Banking analyst and vice president of equity research at Rafferty Capital, Dick Bove, projects they will. Bove cites a combination of bank earnings in double-digit growth for quarter four of 2013 and an overall strong forecast for the U.S. economy as the reasons behind his ambitious projection.
Financial institutions experienced 16.9% year-over-year growth in Q4 2013, according to The Wall Street Journal, earning $40.3 billion in net income according to numbers released by the FDIC.
Bank Stocks “Will Be 100 Percent Higher Than Where They Are Now”
“If you’re looking at the banking industry as if it was manufacturing and you think of the bank balance sheet as basically a factory, the industry is operating at 65 percent capacity,” Bove said in a segment on CNBC.
Bove also pointed to former Fed Chair Ben Bernanke‘s optimistic outlook of a steadily growing U.S. economy as a marker for huge growth among banks.
“If the economy is going to grow at the rate that Mr. Bernanke, myself and others believe, then it will ultimately get to 85 to 90 percent of capacity,” he said. “That will drive [bank] earnings much higher than they are at the present time and it will get these stocks up to this 2.25 to 2.5 times book level, which will be 100 percent higher than where they are right now.”
Bank stocks are already gaining; the KBW Bank Index grew 2 percent on Tuesday, and bigger banks like Morgan Stanley and SunTrust saw gains of 3 percent that day, according to The Street.