Bank earnings could hit a record $38bn in the fourth quarter, while the industry is poised to have a solid 2013, well-known analyst Dick Bove told CNBC on Monday.
Bove noted that industry earnings have risen year-over-year for the past 14 quarters, with banks collectively earning $37bn in the third quarter.
'There's a good chance the fourth quarter of this year will be the highest earnings period ever in the history of the American banking industry', he said. 'And when you take a look at the $38 billion relative to the $25 billion earned in the fourth quarter last year, it'll be a 50% increase'.
He's predicting that investors will flock back to the stocks next year as banks start returning more capital to shareholders. 'Because the industry is massively overcapitalized and has an enormous amount of excess liquidity, the dividends will go up the stock buyback programs will increase', he said.
He expects Bank of America, for instance, to pay out 30% of earnings in dividends over the next couple of years. Other banks will also get to a payout ratio of around 30 or 35%, he said.
So far, the market hasn't recognized the 'superb' outlook for the industry, Bove said.
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While Bove is not covering individual names after having left Rochdale Securities last week, he said the banks with brokerage operations are in the sweet spot.
'Broadly speaking, if you think about the fact that there's been this huge increase in money supply over the last couple of years by virtually every major central bank in the world and that the brokerage-oriented banking companies - Goldman Sachs, Morgan Stanley, Bank of America, Citi and JPMorgan - have not benefited yet by the huge increase in supply', he said. 'You have to assume that that money will get converted into securities, that trading activity will pick up dramatically, that investment banking opportunities right now are probably greater than they've been in decades'.