NEW YORK (
) - Three events over the next 10 days could provide catalysts for a bank stock rally, according to Rochdale Securities analyst Dick Bove, who has been banging the drum on the sector for some time.
1. Greek resolution (good or bad)
Bove has been hoping for a Greek default because, unlike some other observers
including top management at Goldman Sachs(GS)
the analyst does not see such an event triggering a market meltdown. But even if the country manages to avoid a default, Bove sees that event as likely to spark a rally in U.S. banks.
2. Stress tests
Bove argues U.S. banks
are better capitalized than they have been at any time since 1938.
looking at common equity as a percentage of assets. As a result, he sees them passing upcoming stress tests from the Federal Reserve with flying colors.
3. Capital deployment
Shortly after the tests, results of which are expected to be announced at the end of next week, Bove believes banks "may be raising dividends and announcing stock buyback programs across the board."
The tests will involve the largest 19 U.S. bank holding companies, including
Bank of America
(BAC - Get Report)
Most banks are expected to get at least some additional leeway in this area, though one big question mark will be Bank of America, which was embarrassed when it emerged from the last round of stress tests without permission to hike its payout.
Bank of America has said it will not seek permission from the Fed to deploy capital.
Written by Dan Freed in New York
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