He says that some firms have been chasing higher income manufactured from highly leveraged, complex and ultimately risky products.
Following last week’s 0.5 per cent cut in bank base rate, Bonham Carter expects the rate will fall to a minimum of 3 per cent in 2009, meaning savers will look for a safe and reliable income as the knock-on effect will be diminishing returns on deposits.
He points to the Government’s move to part-nationalise some UK banks as “a seminal moment” that will reassure depositors.
He says: “The Government’s willingness to provide substantial amounts of liquidity to allow the banks to fund their operations will, at least in the short term, help support confidence in the financial system.
“Equity shareholders in the banks have clearly seen sharp falls in share prices but the fact that the banks have not been fully nationalised means they are not being wiped out.
“They will, as a result, be able to participate in any upside once the taxpayers have had their cut, although we still have to see the det- ails on an individual bank basis and so the prospects for individual shareholders will obviously vary from one bank or another.”