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Punt out penny share banks

Seven Investment Management marketing director Justin Urquhart Stewart believes a number of banks should have had their share price suspended during the economic crisis.

Speaking at the Money Marketing RDR & Economic Update debate at Grocers’ Hall in London last week, Urquhart Stewart said some banks should have had their businesses re-evaluated and been brought back in a smaller, more efficient state.

He said: “The businesses are all based around the three P’s – their shares are only useful for punts, their shares themselves are pence and their businesses are pants. What we need to do now is to take them out, as we did with Northern Rock. We saw Lloyds move 20 per cent in one day recently – a total of 8p – which is ridiculous behaviour. In any stockmarket, these are not fit for trading and you should suspend those shares, as should have happened to HBOS last year, and you then restructure them, as with Lloyd’s of London 15 years ago, and you focus on the good assets and you run off those bad assets later. You have seen that with Northern Rock in the last year, with a good, if not brutal, job being undertaken.”

Urquhart Stewart said that there has been too great an emphasis on the potential dangers of toxic assets rather than the quality assets within the business.

He said: “Those toxic assets do not help anyone at all, they need to be forgotten. With a focus on the quality assets, you will end up with a smaller, quality business.”

Urquhart Stewart said the problem facing the economy once all others are stripped away is a need to get money flowing.

“The money system is not working and the problem I have with the banking and Government initiatives is that they are filling up the water tank and although the tap is on, only drips are coming out of there. What we need is a financial Polish plumber,” he said.


Too little, too late

Who would have thought anybody could describe a £75bn cash injection “a leap in the dark”, as it was described by Conservative Shadow Chancellor George Osborne or unfortunately as it will also be described, too little too late.

Risk perception needs to change

The fundamentals of asset allocation in relation to risk as a result of the credit crunch were debated by panellists at last week’s Money Marketing RDR & Economic Update.

Fail safe?

The appetite for corporate bonds shows little sign of abating. Advisers accounted for four out of five bond funds sold in January which amounted to £1.4bn and 25 per cent of all fund sales.


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