JP Morgan portfolio manager Alex Robins has been adding to UK banks over the past few weeks as market volatility has made valuations attractive.
Robins’ £117.7m JP Morgan global financials fund had 51.7 per cent in region-specific banks at the end of July.
He says: “We have been adding to UK banks on weakness and we have a small overweight relative to the benchmark. We looked at normalised earnings within the sector and there are some companies that have significant growth potential.
“We believe in the cycle and that UK and European banks will return to a profitability of low double-digit returns of 11 and 12 per cent.”
On Tuesday, Lloyds Banking Group’s share price had fallen by 37 per cent in the last month to 28.7p, Barclays had fallen by 35 per cent to 149.95p and RBS had fallen by 44 per cent to 20.1p.
Hargreaves Lansdown investment manager Ben Yearsley says: “Banking stocks are discounting all the possible bad news into the price but they are far better capitalised than they were a few years ago and they have shrunk their balance sheets.”