View more on these topics

Neil Woodford: Deleveraging of banks in Europe is ‘5 years behind US’

Invesco Perpetual’s Neil Woodford

Invesco Perpetual fund manager Neil Woodford believes Europe’s deleveraging process for banks is “five years behind the US” and will inevitably stall economic growth in the region.

In the April update for the Edinburgh Investment Trust, Woodford argues Europe is lagging behind the US having just begun the process of deleveraging.

He says: “The process of deleveraging has only just started in Europe, which is some five years behind the US, and in our view this will inevitably put a brake on economic growth in the region.

“The outlook for the US, where the banks are largely through the required process of deleveraging and bank lending is returning, has improved – but this means it is more likely that quantitative easing may come to an end.”

Woodford points out that while the stockmarket has performed strongly this year, a number of economic challenges facing Europe “have not disappeared”. 

However he goes on to say that some of the recent concerns over events in Europe have “failed to dampen” investors’ appetite for equities.

He says: “Concerns over the rescue of the Cypriot banking system and further disappointing news concerning the UK economy failed to dampen investors’ enthusiasm for equities more than briefly.

”Despite a mid-month fall, the FTSE All-Share index delivered a total return of 1.4 per cent over the month, marking the 10th successive month that the index has delivered positive returns.”

Signs of a recovery coming from the US have also benefitted the trust’s holdings with BAE Systems and Rolls Royce, according to Woodford.

He says: “Strongly positive contributions to portfolio performance over the month also came from BAE Systems and Rolls Royce.

“Both companies have been re-rated by the stock market, from low levels, as fears about the impact of US sequestration have eased.”

Woodford believes that the stockmarket’s rise over the past year in combination with profit downgrades in the more cyclical areas of the market means that currently “valuations no longer look as compellingly cheap”.

As a result of this he adds that the remainder of the year “may see some consolidation”. However, he argues that the trust has the “appropriate strategy” to meet the current environment and remains encouraged by the “stockmarket’s recent appreciation of the qualities of the investment trust’s holdings”.



Aviva: Advisers say income will rise but profits may drop

Around 60 per cent of advisers are expecting their income to increase over the next 12 months but 52 per cent are worried about remaining profitable, according to Aviva research. According to a survey of 982 advisers, 40 per cent expect their client bank to increase, while 44 per cent are concerned about regulatory costs and professional […]

Hornbuckle sells 60% stake to private investors

Sipp provider Hornbuckle Mitchell has sold 60 per cent of the business to two private investors. The move sees a number of small shareholders bought out while all current Hornbuckle executive directors will retain their current shareholdings. Following their investments, new single largest shareholder Richard Wohanka becomes non-executive chairman and Phil Smith becomes chief executive. […]

Positive outlook for house prices over the next 12 months

Optimism in the prospects for UK house prices rose sharply over the first quarter, with 45 per cent of participants in the Halifax Housing Market Confidence Tracker now expecting prices to rise over 2013. The tracker monitors public sentiment towards the housing market. A sample of 1,702 adults are questioned across Britain and data is weighted to the […]

Barclays tops FCA complaints data

Barclays was the most complained about financial services firm between July and December last year, with complaints against the firm up by almost 50 per cent.  Data from the Financial Conduct Authority, published this week, reveals the bank received 414,302 complaints in the second half of last year, up 47 per cent from 281,484 in […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm