Banking Sector Value Shares
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Banking Sector Value Shares

Banking Sector Value Shares


Trading Features / Strategies from Simon Denham of Capital Spreads.

Well we could be in for a bit of relief today as the markets all seem to have stabilised to some extent since the dramas of Friday and Monday morning.

Rumours that Lehman might be the next in line for implosion after DB Singapore apparently refused their name in the money markets were quickly quashed. The stock was at one point some 50pc down on the day at around $20.50 but later bounced as investment banks rallied round and closed 'just' 23% off at $30.50. MF Global, the US arm of Man Group in the UK, which was sold off last summer for those of you who remember, fell by well over half on rumours of Hedge Fund withdrawals. The company has had a truly grim start to life as the float was pretty much a disaster in the first place followed by a 'rogue trader' event a few weeks ago and now rumours of heavy withdrawals. 'If' they manage to survive the current rumour mill the stock could be the buy of the year.

eeerrr...Sorry, actually I think that JP Morgan have managed that with the $2/share acquisition of Bear Stearns (who were expected to announce strong numbers this week). Seldom can an acquiring party have received such a one off boost to its value. Not surprisingly, as virtually every other financial share on the planet was falling around 10%, JP Morgan Chase's stock went up by 10%. I wish the Fed had knocked on my door. "Dear Sir ...will you take over a rival who is very profitable but is temporarily a bit short of funding. Oh! ... by the way, we will also give you the funding that they require." I bet Chase almost bit the Fed's hand off.

There is an eerie lack of activity across the board this morning as dealers try to take stock of the suddenly changed world in which they are likely to be operating in for a while. However the buyers are definitely out in the early light with the FTSE looking to rebound from yesterdays dramatic drop with a 100 point rally on the open this morning. First calls are at around 5515 for the FTSE 100.


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Banking stock is likely to be the big mover on early indications with HBOS, Barclays and RBS likely to bounce from yesterday's panic. With much of the bigger banks' revenue coming from foreign shores the fall in the pound may well make those earnings look rather tasty. And for all the slight slowdown in Far Eastern, growth it is still around 7 to 8pc. Whilst we might look with trepidation at the current situation for the US, UK and bits of Europe it cannot be denied that the rest of the world is doing OK thank you very much.

As mentioned before the slow decline in major bank names has been going on for some considerable time. The UK now has only a small handful of players, Europe and the US have seen a veritable tidal wave of mergers and acquisitions over the past decade and the current situation would seem to indicate that the stronger placed institutions may well come out of this in rather a nice position.

While the sentiment today is very rosy to start with the hunt for the next weak link goes on. Barclays' failure to win ABN must now look like one of the best silver medal awards of 2007 as RBS, Fortis and Santander struggle to swallow the mouthful. The bank even managed (in losing) to actually make a profit and to weaken its competitors in the process. Over in Switzerland the Gnomes are furiously trying to bolster UBS which seems to have come out as the most exposed of all the major Europeans to the current woes in the US. As banking is virtually the only export product for the country it is unlikely that the Swiss authorities will stand back and let such a flagship company go to the wall.



The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.


Capital Spreads » "With Capital Spreads you get all the normal
advantages of Spread Betting plus..." » read Capital Spreads review.




Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.

'Banking Sector Value Shares' edited by SD, updated 18-Mar-08



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