NEW YORK (AP) ¿ Prominent banking equities analyst Richard Bove said investors should buy avoid buying troubled regional banks, saying the stocks' big rally this summer outweighs a projected earnings recovery. Troubled banks have drawn big bursts of funds due to a belief that their recovery will be more dramatic than better-off banks, the Rochdale Securities analyst said in a note to investors this weekend, and are now over-priced. If investors want to buy into banking, they should buy "higher-quality" names. He recommends the investment banks, Goldman Sachs Group Inc. and Morgan Stanley; the financial-services giants Bank of America Corp., Citigroup Inc. and J.P. Morgan Chase & Co.; and firms that focus on wealth management, such as Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp. In late morning trading Monday, Goldman shares rose $2.42 to $165.93; Morgan Stanley added 72 cents, or 2.5 percent, to $30.42; Bank of America was up 62 cents, or 3.6 percent, to $18.09; Citi gained 23 cents, or 4.8 percent, to $4.93; JPMorgan climbed inched up 33 cents to $43.99; Bank of New York Mellon rose 47 cents to $29.59; Northern Trust shed 12 cents to $60.23; State Street added 91 cents to $54.38.
Investors have poured money into the most troubled banks in order to gain more "bang for their buck," thinking that the weakest banks will have the strongest recovery, Bove said. The banks with the smallest chance of hitting earnings from 2007, according to his calculations of their expected results through 2011, have gained most since the end of June, he said. The gains in these troubled bank stocks outweight the projected gains in their earnings, he said, and the better-off banks are being relatively ignored by investors. Bove also said that most bank stocks will see drops in earnings over the next six months or year. He said investors should avoid all regional banks, which include Wells Fargo & Co., U.S. Bancorp, PNC Financial Services Group Inc., BB&T Corp., First Horizon National Corp., Fifth Third Bancorp, KeyCorp, Marshall & Ilsley Corp. and Zions Bancorp. Wells Fargo stock gained 38 cents to $28.31; U.S. Bancorp rose 19 cents to $22.47; PNC fell 40 cents to $42.46; BB&T gained 9 cents to $28.12; First Horizon inched up 2 cents to $13.63; Fifth Third added 19 cents to $11.10; KeyCorp traded up 18 cents, or 2.5 percent, to $6.90; Marshall & Ilsley added 7 cents to $7.36; and Zions rose 25 cents to $18.48.