BankAtlantic sues analyst, claiming defamation

Fort Lauderdale, Fla.-based BankAtlantic filed suit in the state court for Broward County, Fla., against Bove and Ladenburg Thalmann, citing a July 13 research note that asked the question "Who is Next?" following the failure of IndyMac Bancorp.

Bove, based in Lutz, Fla., used two different methods to come up with lists of "who the next failure is." The first examined the non-performing assets of the bank and divided them by its outstanding loans. Bove said a ratio above 5 percent suggested danger. BankAtlantic Bancorp Inc. was 10th on his list, with a ratio of 4.4 percent.

The second method divided non-performing assets by the institution's reserves-plus-common-equity, and said a ratio above 40 percent put the institution in "the danger zone." Using this method, BankAtlantic was 12th on Bove's list, with a ratio of 38.4 percent.

BankAtlantic's shares fell 30 cents, or 25 percent, to close at 90 cents on July 14, the first trading day after Bove's report was released. The stock has since recovered, and rose 21 cents, or 12.5 percent, to close at $1.89 Monday.

A spokeswoman said upon advice of his attorney, Bove had no response. Paul Caminit, a spokesman for Ladenburg Thalmann said, "We'll defend ourselves against this meritless lawsuit."

Highly ranked by several different outlets, Bove's commentary is frequently quoted in the financial press. He distributes his reports on banking companies widely, and is known as a contrarian for views that frequently tack differently than many on Wall Street.

But BankAtlantic maintained the methodology Bove used was flawed. It claims it is well capitalized, its ratio of non-performing loans to total loans is 1.25 percent and its ratio of non-performing loans to its capital and reserves is 12.5 percent. Using Bove's parameters for his "danger zone," BankAtlantic maintained its "numbers are not even close."

"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," the company said in a statement. "Instead, he only examined holding company data which, in at least our case, is meaningless information. This is simply shocking."

BankAtlantic maintained only the Federal Deposit Insurance Corp. had sufficient data to judge whether any institution was in danger of failing, and in its own case, the data Bove used was that of its two holding companies, BankAtlantic Bancorp and BFC Financial Corp., which "contain other assets and business lines which make the comparison nonsensical."