NEW YORK (TheStreet) -- U.S. banks like Bank of America (BAC - Get Report) , Morgan Stanley (MS - Get Report) and J.P. Morgan Chase (JPM - Get Report) have effectively been nationalized, with new regulations forcing them to hold more cash than ever while shrinking their loan books, according to Rafferty Capital Markets analyst Dick Bove.

In a report published Sunday, Bove strips away accounting gimmicks to argue banks have not grown real earnings since 2007. During that time, they have increased cash and cash-like instruments by 11.5% annually to $2.2 trillion. Loans, meanwhile, are up 3.4% annually over that same seven-year period.

Bove sees the buildup of cash (including the purchase of Treasury bonds) as the inevitable result of regulations that force banks to hold more capital against riskier lending activity. This inability to take risk has depressed earnings and weighed down economic growth.

Bove looks at pre-provision, pre-tax net revenue to arrive at what he considers real earnings. That figure has fallen by 40% over the past seven years.

Indeed, the market seems to agree with Bove, which is why shares of most big banks have underperformed the S&P 500 over the past 12 months. While the index has gained nearly 12%, shares Bank of America, J.P. Morgan and Citigroup (C - Get Report) have all lost ground.

Recognizing the difficult earnings environment for banking, many financial services institutions have tried to focus on the more profitable, less capital-intensive money management industry. Capital and talent have flowed out of regulated banks into the asset management industry.