Ladenburg analyst Richard Bove released a very helpful (if you're looking for short ideas) report last week called "Who Is Next," listing firms in ascending order of financial health. It was pretty grim (especially if you were anywhere near the top)! This upset a bunch of truth suppressors who proceeded to flip out, and Bove was strong armed into clarifying his outlook concerning the state of banking, saying that, actually, "the main thrust of [the] report is that the banks are in better condition than is generally perceived" and that the implication that there are significant problems in the financial system "was not the point at all." It was also stressed that National City (NCC) and First Horizon (FHN) are "definitely not" in the danger zone.
Unfortunately, Bove didn't have time to slog through the entire list and said nothing about Bank Atlantic, which was listed only a few slots better than IndyMac. A more self-assured/solvent bank probably would've let the snub fly but BBX is neither. Instead, for this most egregious presentation of facts, Bank Atlantic has slapped Bove/Landenburg's ass with a lawsuit seeking damages for defamation and negligence. Bank Atlantic's chairman Alan B. Levan also released a statement insinuating that perhaps others were unjustly maligned in the report as well, and rather cattily referred to Bove's analysis in air quotes ("Although we do not know how many errors appear in the Bove 'analysis,' we do know about BankAtlantic"), which must mean they're really pissed. Who is next (to sue Bove)? Haven't done any "analysis" yet but we really want it to be IDMC.
Earlier: What I Meant To Say Was-- BUY INDY
Dick Bove's Going To Make You Rich
Statement from Bank Atlantic's chairman Alan B. Levan:
In the wake of the highly publicized failure of IndyMac,
breathless television reporters filled the airwaves with the repeated
question on the minds of an anxious public: "who is next?" Of course,
if there is anyone who knows "who is next," it would be the folks at
the FDIC with mountains of detailed financial information about every
institution enjoying deposit insurance. They, however, keep what they
know to themselves - for good reason. Thus, without an official answer
based on real information, some members of the media, anxious to fill
the gap of knowledge caused by the FDIC's silence turned to what
seemed to be the next best thing: a supposed expert who said he knew
the answer and was willing to share it with an anxious national
audience - Richard X. Bove and Ladenburg, his employer. The problem is
that, while Bove's report purports to consider which banks might fail,
he failed to examine the health of the banks and thrifts in his
report. Instead, he only examined holding company data which, in at
least our case, is meaningless information. This is simply shocking.
Although we do not know how many errors appear in the Bove
"analysis," we do know about BankAtlantic. Had Mr. Bove examined the
financial condition of BankAtlantic, the FDIC insured institution, he
would have discovered the following: (i) in every measurable category,
BankAtlantic is "well capitalized;" (ii) BankAtlantic's ratio of
non-performing loans to total loans is, in this market, an enviable
1.25%; (iii) BankAtlantic's ratio of non-performing loans to its
capital and reserves is 12.5%; and, (iv) Bove's "Danger Zone" was
above 5% of non-performing loans to total loans and above 40% of
non-performing loans to total common equity plus reserves.
BankAtlantic's numbers are not even close. (While this information was
as of March 31, 2008, the information as of June 30, 2008, will not be
These are not opinions. They are facts. And these are just some of
the many measurable criteria that any knowledgeable person acting in
good faith would use to determine where BankAtlantic should sit on the
fear index - the answer is, of course, nowhere. Based on these facts -
indeed, undisputed facts - no one would ever conclude that
BankAtlantic belongs to any list of "next."
Notwithstanding these undisputed facts, on July 13, 2008, Richard
X. Bove and Ladenburg published a report with a title that turned the
question on the minds of many into an answer: "Who Is Next." In it,
Bove and Ladenburg identified two "methodologies" that, according to
them, could be used to determine whether a "bank or thrift" was in or
near what they called "the danger zone." He then took data provided by
a research firm on bank and thrift holding companies, asserted and
implied that holding company data represented the financial condition
of insured subsidiaries, and undertook to specifically identify
"institutions" that, according to him, were in or near the "danger
zone." In the case of BankAtlantic, the financial statements of its
two holding companies do not mirror the banking subsidiary, even if
such a methodology made sense. BankAtlantic's two holding Companies,
BankAtlantic Bancorp and BFC Financial Corporation contain other
assets and business lines which make the comparison nonsensical.
Simply by way of example of the gross errors in this "analysis," Bove
compared the non-performing loans of BankAtlantic with the capital of
BFC Financial Corporation, a public company that owns 23% of
BankAtlantic Bancorp that in turn owns BankAtlantic and other business
lines. The so-called analysis itself was totally false and the
impression it created foreseeable.
The problem we face is that the indisputable facts are now buried
in the sensational headlines Bove and Ladenburg have falsely created -
and, for whatever reason, have refused to retract. Literally dozens of
other analysts and commentators have picked up on the Bove "analysis,"
assumed its legitimacy, and passed it on to a growing audience on the
Internet. Soon, the falsehood will be presumed true and the truth
false, leading us to regretfully conclude that the only way
BankAtlantic can clear its name from this irresponsible defamation -
and that is what it is - is in the courthouse.
While we work through this process, we also want everyone to know
that, before publishing or republishing the Bove Report, or providing
him an audience to repeat it, one should do what the Bove Report did
not do - look at the publicly available financial information which
makes clear that BankAtlantic is financially strong and well
positioned to serve its customers and the community.