Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at

Colin McLean: why the banking sector is attractive again

by Colin McLean on Nov 21, 2012 at 11:51

The severe impact of deleveraging, as banks cut back their loan books, is already threatening growth. If the UK government needs any further warning on how bad this could get, France is showing how rapidly an economy can shrink when deleveraging really bites. That is not a scenario Britain needs.

And when banks are being encouraged to shrink, telling them to lend does not work. Banks can be given gross lending targets but net lending falls as loans are quietly called in. 

Reduce pressure

That leaves politicians with just one route to economic growth and re-election: they must reduce the pressures on banks. Cutting the sector some slack seems to be the way in which the conflicting challenges of regulation and growth are resolved. 

There are signs politicians are resisting calls from regulators and central banks to raise the bar even further for banks. For banks with assets to sell – such as RBS with its Citizens Bank or Lloyds’ interest in St James’s Place – improving their balance sheet is easier.

We can expect more discussion about flotations and disposals, meaning despite the high-profile fines and political rhetoric, life may get easier for banks, with less appetite for rapid deleveraging. 

Politicians might recognise what eventually has to be done about the sector, but much of that will be years down the line. Getting banks to lend again is what matters.

Our leaders will set emotion aside and focus rationally on their own election prospects. This means banks, at current valuations, are attractive, despite the uncertainties around.

Sign in / register to view full article on one page

8 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Nov 21, 2012 at 12:15

Judging by the performance of his long/short funds, if he says buy, I’d be tempted to sell!

report this


Nov 21, 2012 at 12:45

I doubt CL has tried opening a bank account recently either. The HP/Autonomy (mis/creative) accounting scandal is just the tip of the......the banks & utilities are up to merde.

report this

david rogers

Nov 21, 2012 at 13:02

Following on from the comments of Anonymous 1 the dismal performance of the global investment trust doesnt add credibility to opinions from SVM

report this

Anonymous 1 needed this 'off the record'

Nov 21, 2012 at 13:17

quote from SVM website:

The Absolute Alpha Fund aims to beat cash returns over a 12 month period, substantially beat cash returns over 36 month periods and beat the equity market over a full cycle....

From the same website, Absolute Alphas return over three years -28.0%.

Epic fail?

report this

Dice McCairn

Nov 21, 2012 at 14:03

At the same time as having some of the most dismal performing funds SVM has some great funds. Look at their European SRI fund or Margaret Lawson's.

Their global fund is abismal...........

report this

Philip Milton

Nov 21, 2012 at 14:20

Hey, give the man some credit - he is an excellent and well-respected fund manager and after the fall-out on SVM Global, we're buyers - joining us? We weren't in the 'bad' funds however. He'll come good, mark my words.

I can see the banks as being the next Government privatisation programme - you saw it here first - and at a profit.

report this

david rogers

Nov 21, 2012 at 16:23

Mr Milton, not joining you as a buyer but hanging in there in the hope that you are right!

report this


Nov 21, 2012 at 17:11

I cannot see a privatisation of the banks until the regulators start coming down hard on derivatives and especially synthetics. If the issuers get the green light without there being a massive clean up in London derivatives beforehand then there will be an even bigger scandal than what we've gone through all in the name of investor protection.CMcL is calling it early on banks imo.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home

As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Sponsored Video: Barings on investing in Frontier Markets

From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:

Look up the fund managers

  • Colin McLean
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them


On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet