Go long Bank of America Corp. (BAC) and short Goldman Sachs Group Inc. (GS). That’s the advice that Dick Bove shared with CNBC in an interview on Monday. The prominent banking analyst believes that Bank of America’s share prices will climb as more than 120% over the next five years on strong earnings while the chronic earnings problems of Goldman Sachs will see its stock fall unless a major restructuring, including a change of management, takes place.

As of the end of trading on Tuesday, Goldman’s stock price was sitting at $239.41, down 0.02% since the beginning of the year. Bank of America, on the other hand, is up 25.07% year to date (YTD). From its current price of $27.64, if Bove is correct in his prediction that the bank’s shares could hit $61.50 by 2023, then that would be a gain of 123% over five years. (To read more, see: Bank of America Stock Could Break Out.)

Bank of America

One of the major struggles big banks have been having of late is falling trading revenues. Much of this decline has been attributed to low volatility in markets and the narrow price spreads within which many assets are trading. Yet, despite reporting a 22% drop in their Q3 year over year trading revenues, Bank of America still managed to beat earnings expectations. Bove is convinced that this performance will only continue to improve.

Based on a projection of a 6% growth rate in the money supply over the next four to five years, Bove claims that one out of every $9 of that new money should end up at Bank of America. He also projects an optimistic 5.5% trend growth rate in GDP, which means that the bank will get “one out of every $20 in terms of loans.” All of this should result in annual earnings growth of 10% over the next five years, Bove told CNBC. 

Goldman Sachs

Despite also beating Q3 earnings expectations, Bove argues that Goldman Sachs’ overall performance over the past several years tells a story of declining earnings that will only likely continue. The big investment bank’s earnings are lower than they were 10 years ago, lower than they were five years ago, and lower than they were last year, claims Bove.

Goldman has traditionally been the Wall Street bank specializing in big trading revenues. But with the post-financial crisis implementation of the Volcker Rule that prohibits proprietary trading for banks, as well as the low volatility characterising equity and fixed-income markets, this major source of profits of the bank’s profits has been lagging. (To read more, see: Why Morgan Stanley Stock Is Crushing Goldman Sachs.)

Bove argues that Goldman benefits from a certain mystique that the bank holds within the minds of investors, a mystique that translates into the bank’s stock price being positively correlated with how much the bank’s executives are being paid. The fact that the bank is not making money is enough evidence for Bove that the stock is likely overvalued. He believes that the bank needs to get refocused on doing business that actually earns money, and that current CEO Lloyd Blankfein is actually standing in the way of that goal.

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