Wonderful news for option holders: bank stocks predicted to triple by 2015

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Dick Bove has produced some cheering news for anyone holding options issued in 2008. According to Dick, an esteemed US banking analyst at Rochdale Research, both bank earnings and bank stock prices could triple by 2015.

Bove's rationale for the increase is as follows -

- Between 1980 and 1999 banks increased their capital liquidity and reserves, but loan losses during this period meant these increases didn't immediately feed through to earnings power.

- It was only when loan loss provisions declined between 1991 and 1998 that earnings became explosive.

- Banks are now repeating this phenomenon - reserves have more than doubled and equity is up by a third. When writedowns end, "explosive earnings and stock growth are ahead."

Bove has been wrong on several occasions, so there's no guarantee that he will be right on this one. However, it would be nice if he was - particularly for holders of 2008 options, many of whom are already doing very nicely out of last year's allocation.

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