Leading fund managers James Harries, Carl Stick and Richard Penny have all issued a bearish outlook on the banking sector despite cheap equity valuations.
Newton £2bn global higher income fund manager James Harries (pictured), says the banking system is more concentrated now than it was during the credit crunch, despite being less geared.
He says: “It still remains a clear and present danger to the global economy. We are astonished to the extent that banks have not been restructured.
“I do have exposure to DnB NOR bank, as any bank is as strong as its sovereign. Norway has a lot of money.”
Rathbones £440m income fund manager Carl Stick says: “I do not trust the book value of banks. There may be value there, but I would notwant to take the risk. It is not in my ability to go through banks’ balance sheets and say that I understand it and I am happy I have got security and margin safety there.”
As well as the lack of transparency in banks’ balance sheets, Stick says that it’s not necessary to have the risk of the European sovereign debt issues and
disentangle European banks exposure to debt.
Stick (pictured) says: “If you look at other businesses, there is a greater margin of safety and a better chance of getting it right than looking down Barclays’ and Lloyds’ balance sheets.
Fund manager Richard Penny, who runs the £223.5m L&G UK alpha fund has no exposure to banks.
He says: “What politicians might do to fix the problems in terms of banks might cause the sterling to stay low and possibly weaken.”
He adds that would be generally quite good for exporters, like financials, as there needs to be proper restrictions on the net balance sheets of banks and that would not be good for bank shareholders in the longer term.