Richard Bove is the bank equity analyst at Rafferty Capital Markets (https://raffertycapitalmarkets.com). He is a longtime friend and is as distinguished and seasoned a bank analyst as anyone I know.
This morning, he put out a research note that gave me pause. We thank Dick for permission to share this with our readers:
The United States banking regulators believe that they are operating in an environment whereby nothing they do will be criticized and there will be no negative reaction from any source. This is clearly correct for actions they take in the United States against U.S. banks.
It is not true when the regulators attack foreign banks as they did BNP Paribas. One reaction is that France is now about to charge a division of JPMorgan Chase with criminal activities. This could be the beginning of a wave of attacks by foreign governments against U.S. banks in a “tit-for-tat” atmosphere.
The broader reaction of course was when these foreign governments specifically ignored a request by this government to not join the AIIB, China’s new World Bank. Every major government in the West joined; Japan was the only country that heeded the U.S. request.
The “Ugly American” is back and s/he is part of the bank regulatory authority. U.S. banks could pay additional heavy penalties for this.
At Cumberland, we are currently over weight the financial sector, including banks. We shall see how this warning by Dick Bove plays out. That said, I have followed Dick Bove’s research work for decades and respect this warning. It is coming from a very seasoned and experienced professional.
