Analyst: Brokerage Outlook Improving

Analyst Richard Bove, long a skeptic for the ailing financial sector, is becoming more comfortable with the outlook for the big brokerage firms.

The outspoken Punk Ziegel analyst took off sell ratings on four brokers as a result of improving market conditions. Bove is particularly optimistic on Lehman Brothers(LEH Quote), which he raised to a buy, while he upgraded Goldman Sachs(GS Quote), Merrill Lynch(MER Quote) and Bear Stearns(BSC Quote) to market perform.

The rating changes hinge on several positive changes that have developed over the past three weeks, according to a new note. Bove writes that a combination of lower interest rates, a return of lenders to the commercial paper markets, a "topping out" of foreclosures in absolute terms, a surge in mortgage refinancing activities and potentially stronger merger and acquisition activity, among other things, have sparked his optimism on the four brokers. ...