Walker predicts more takeovers along the lines of JP Morgan’s acquisition of Bear Stearns earlier this year, where a banking giant effectively had to bail out a smaller rival to avoid a scandal.
He says: “I would strongly expect over the next six to 12 months to see a lot of M&A activity and not from a position of strength necessarily – the likes of JP Morgan/Bear Stearns, with big banks coming in to bail out small banks. There are going to be a lot of banks potentially going under but they will not go under because they will be bailed out by other banks.”
Walker says his alpha fund has no exposure to US financials and the North America fund is strongly underweight in the sector.
He says banks are only starting to address the scale of their losses and it is far too early for his funds to consider moving back into the sector.
Walker says: “We are not looking at one or two quarters here, we are looking at one or two years.”