ITS HARD TO KNOW WHAT GRAVY WILL EMANATE FROM THE BANKING SECTOR

Bank 11/02/16 1/03/16 % gain in the period
Barclays 148p 156p +5.4%
Standard Chartered 387p 431p +11.3%
Lloyds 56p 73p +30.3%
HSBC 420p 458p +9.1%
RBS 224p 220p -1.8%
Societe Generale €27.5 €32.5 +18.2%
BNP Paribas €39.8 €43.2 +8.5%
Deutsche Bank €13.7 €16.00 +16.8%
Commerzbank €6.4 €7.5 +11.7%
Santander €3.31 €3.70 +11.8%
Citigroup $34.98 $39.22 +12.1%
Bank of America $11.16 $12.68 +13.4%
Goldman Sachs $140.7 $151.5 +7.6%
Wells Fargo $45.16 $47.53 +5.2%
JP Morgan Chase $53.07 $56.88 +7.2%

 

 

On 11th February 2016, literally only 3 weeks ago, the banking sector hit their lowest point, in many cases since the banking and credit crisis at the beginning of 2009, forgetting of course RBS and Lloyds, who were dead and buried without trace by then. Greater capital requirements to do the same business plus almost deflationary conditions for dividends which threatens cuts of the type Barclays inflicted on its investors today, makes this sector, the US partially excluded, an unattractive sector to invest in, particularly with the impairment charges growing in emerging markets and the energy sector. Add PPI and other misdemeanours and not surprisingly some investors start to put the white flag up.  It is interesting to note that Sovereign Wealth fund managers have been the largest sellers of the banking sector in January.

 

Many banks have recovered their poise in the last few weeks, but with global growth starting to show signs of wilting, personally, I find it hard to raise any enthusiasm regardless of any thoughts of backing the truck up with banking stocks, apart from say JPM, Wells Fargo and Goldman, which during this period have made less spectacular gains. However their recovery has been in place for considerably longer time. Lloyds Banking Group’s gain has been indecent and down to a special divided – great for shareholders, but probably should not have been paid though it has boosted the share price value. RBS’s performance has been abysmal and Barclays hit land mine this morning by cutting its dividend and for producing a recovery programme that was unconvincing.

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