He says despite many banks being in a poor condition, further losses are almost inevitable. He says: “It is clear that now is not a good time to be in bank equities as we are not sure of the quantum of bad assets. Following the announcement of the Government’s asset protection scheme, we have now seen most of the ammunition fired in an attempt to recapitalise the banks.
“The next question is nationalisation, although some may argue it has already happened, and if the need is there, I am in favour of it taking place.”
Woodford sees no sign of green shoots in the market and says the economy is set for a prolonged adjustment lasting three to four years. He predicts house prices could fall by up to 20 per cent further.
He says the Investment Management Association’s decision on yields in the UK equity income sector will not affect the running of his funds, having already moved sector. He adds: “It is a decision that could end up being unwound in 12 months by the IMA. We are confident that we will be able to deliver on dividends although there will be some cuts from the likes of BT.”
Baronworth Investment Services director Colin Jackson says: “I am not one to argue with Neil Woodford but I cannot see how anyone can make a long-term call on the banks, given this environment. I think those willing to take a punt should only go in if they can afford to lose the money.”