Is now the time to buy back into big banks?

The Daily Telegraph - Your Money - - FRONT PAGE -

Ten years on from the fi­nan­cial cri­sis that led to the Bri­tish tax­payer cough­ing up tens of bil­lions to bail out the banks, pro­fes­sional in­vestors are re­turn­ing to the trou­bled sec­tor. More fund man­agers are adding bank stocks to their port­fo­lios and ded­i­cat­ing an in­creas­ingly sig­nif­i­cant pro­por­tion of their funds to them.

A re­cent sur­vey from Bank of Amer­ica Mer­rill Lynch found that pro­fes­sional man­agers were more heav­ily in­vested in bank shares than in any other sec­tor, rel­a­tive to his­tor­i­cal av­er­ages.

Some fund man­agers be­lieve that banks have be­come a less risky prospect af­ter years of more strin­gent reg­u­la­tion. Po­ten­tial in­ter­est rate rises should en­able banks to ex­pand profit mar­gins, be­cause they hold larger amounts of cash in re­serve, and there is the prom­ise of larger div­i­dends af­ter a decade in which some stopped pay­ing them al­to­gether.

Hugh Sergeant, man­ager of the £500m River & Mer­can­tile World Re­cov­ery fund, said: “The up­shot for in­vestors is that, af­ter a decade of re­struc­tur­ing, many global banks now look set to be able to grow again.”

De­spite these im­prove­ments, bank stocks still look cheap com­pared with the wider mar­ket. So, with the pro­fes­sion­als pil­ing in, is it time for DIY in­vestors to fol­low suit?

Alex Wright, man­ager of Fidelity’s £3.3bn Spe­cial Sit­u­a­tions fund, said reg­u­la­tion had been good for in­vestors as it had forced banks away from more ex­otic and high-risk loans.

Mr Wright owns five dif­fer­ent bank stocks, in­clud­ing Lloyds, Citibank, RBS and Bank of Ire­land. They ac­count for around 14pc of his fund.

He said banks had re­verted to sim­pler forms of lend­ing and an­other

Bank shares are back in favour with fund man­agers. Should DIY in­vestors fol­low suit and pile in, asks Harry Bren­nan

HSBC is fund man­agers’ most pop­u­lar bank: it is in the top 10 of 142 port­fo­lios

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.