By ADRIAN LOWCOCK 04/08/2010
This week saw the start of the banking sector reporting season. HBSC kicked things off in the UK and BNP Paribas on mainland Europe. Both reported strong figures and the share prices across the whole banking sector rallied on hopes of a return back to strong profits.
The improved results are primarily due to the stabilisation and falling of their bad debts. In HSBC’s case this helped profits double to $11.1 billion. However, it takes more than the headline figures to determine whether the future will remain as bright.
Investors should return to the crisis of 2008 and recall the lessons learnt then. One of the most surprising and deeply disturbing issues was just how little people understood of the banking sectors’ finances and balance sheets. In many instances, this included the bosses of the banks themselves. Whilst things have become simpler, banking balance sheets remain complex and beyond the reach of most private investors’ expertise.
Additionally, the markets are also reacting to positive news and re-rating all of the banks at the same time, treating them all equally, taking the view that sooner or later every bank will be a buy. Whilst the outlook for banks continues to improve and the sector has offered up some opportunities, it is very difficult to determine when to buy.
The share prices continue to remain volatile and investors should avoid rushing in on the back of a wave of euphoria. When investing in a specialist sector, it helps to get the advice and assistance of the experts. Therefore, we would suggest using a managed fund such as Jupiter Financial Opportunities fund, now co-managed by two of the industry’s leading financial sector experts, Philip Gibbs and Guy De Blonay.
Buying a managed fund will give you exposure to the sector, but leave the difficult choices of which companies to invest in and when to buy and sell them to the expert.
If there is anything you wish to discuss please call one of our Investment Professionals on 020 7189 9999.