Dick Bove, one of the prominent advocates for bank stocks believes that buying banks can be very risky. He thinks that the investors are getting a little too enthusiastic about banks and that is worrying. The financial sector companies have shown a growth and rise in their earnings, but, not all profits are created equally. Banks have shown good profits in areas like sales of assets and accounting changes, but these are non-core assets. As for the core areas, the results are not too impressive. The regulatory environment is not so promising for these bread-and-butter banks.
According to Bove, there have been no impressive improvement in core earnings. However, a significant improvement was seen in the reported earnings in the second quarter results. The past couple of years have seen these banks all over their stocks. Still, the investors are scooping up bank stocks.
For many investors, traditional investments in gold is no longer so lucrative and they are shifting from those assets into value investments. Investors prefer equities over bonds. Bank-owned properties are offering excellent opportunities for investments. And there are many investors who find it a good idea to buy banks. There are many different aspects that one needs to look at.