Bank losses from loans will surpass Great Depression-era levels?

Two prominent Wall Street analysts, Mike Mayo and Dick Bove argued over the state of American banks.

Mike Mayo said that mortgage-related problems were "farther along," and U.S. banks were likely to face "a rolling recession by asset class." He stated problems among credit card, commercial real estate and industrial loans would rise through 2010, and banks' losses from loans, on a proportional basis, would surpass Great Depression-era levels, reaching 3.5% of their $7 trillion against 3.4% that banks had posted in 1934. 

Dick Bove, on the other hand, stated "My belief is that the economy has turned." He estimated Bank of America's stock price will ultimately "return to its all-time highs." 

There also was the third party, Peter Winter, an analyst at BMO Capital Markets. Winter warned that the recent rally in bank stocks was "not sustainable," and they would start climbing quickly after recent improvements of 73% as a result of positive statements by bank chiefs. 

It should be noted that chief executives of Bank of America, Citigroup Inc. and JPMorgan Chase & Co. have all reported a turned profit during the first two months of the year, while most investors have sold off bank shares.

The arguments have affected the stock prices of Bank of America, which fell 5% to $7.24 at the trading day's open, and closed down 1.6% to $7.48. The KBW Bank Index closed down 3.8% to $29.61.