The banking crisis is finished.
That’s the somewhat surprising message from OG banking analyst Dick Bove, who rose to fame with his bold calls at the height of the 2008-2009 crisis.
“I think that the near-term banking crisis is definitely over,” the Odeon Capital Group Financial analyst said on Yahoo Finance Live (video above).
Bove’s call is rooted in his interpretation of recent events to prevent a wider crisis in the financial system.
On Thursday, 11 U.S. banks led by JP Morgan (JPM), Bank of America (BAC), and Citigroup (C) banded together to inject $30 billion in uninsured deposits into stumbling lender First Republic (FRC).
The move follows a steep drop in the share price of First Republic, which was the nation’s 14th-largest bank as of Dec. 31 with $212 billion in assets.
“I think that if you go back in history, you know that time before the Federal Reserve was formed, that’s what was done to preserve stability in the banking industry,” Bove explained. “The banks would come together and basically share funds and bail out the problem company. The big event in 1907, which ultimately gave rise to the Federal Reserve, is when JP Morgan supposedly got all the bankers in his house, locked the doors, and said you can’t leave until you solve this banking crisis. And they solved it.”
He added: “And then in more recent times, when that mutual fund went down [in 2008], the same thing happened. Everybody got together, put money in, except for Bear Stearns, which refused to do so. And so we’re seeing it happen again. And it works.”
To be sure, the past week has been one for the history books in the banking space.
Late Wednesday, Credit Suisse (CS) said it would tap about $54 billion from Swiss regulators as its own internal crisis spread to public markets.
And just one week ago, Silicon Valley Bank’s collapse marked the second-largest bank failure in the U.S., behind only Washington Mutual during the Great Recession. Signature Bank’s (SBNY) demise was the third-largest bank failure in history.
The turbulent situation caused regulators to spring into action to prevent a banking crisis and mass tech layoffs, which is what likely would have happened if left unaddressed.
The collective moves worldwide have stabilized broader equity and bond markets. But not everyone is ready to give an all-clear sign similar to Bove.
“We shouldn’t get ahead of ourselves, and it’s worth remembering that we’ve already had a temporary period of stability on Tuesday that was then dented by the Credit Suisse worries on Wednesday,” pointed out Deutsche Bank strategist Jim Reid in a note on Friday.
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