Axa Framlington equity income manager George Luckraft has compared the banking sector with the good, the bad and the ugly.
Speaking at the Axa Framlington conference in London last week, Luckraft said the good include HSBC which has “stayed within its means”. Northern Rock, whose funding model has resulted in its difficulties, is among the bad. The ugly is the impact of the credit crunch on the markets.
Luckraft admitted he took a hit on Northern Rock, selling for 480p a share on the day that the Bank of England announced its bailout but he said he does not expect any banking sector meltdown.
He said: “It is likely that the ugly will come through this OK, but it is still a case of waiting to see who has been swimming naked.”
UK select opportunities fund manager Nigel Thomas said the crisis is similar to the 1907 bank panic in the US which saw stockmarkets fall by nearly 50 per cent from their peak the previous year, resulting in bankers creating, buying and owning the Federal Reserve system in 1913.
Thomas said: “I am not comfortable on financials whatsoever and common sense dictates you should stay away.”
The credit crunch has hammered the performance of most UK funds in recent weeks. In the UK equity income sector, Invesco Perpetual manager Neil Woodford’s two funds are among only nine funds to produce positive returns following Northern Rock’s share price crash.