PA ANALYSIS: Is this the bottom for banks?

Added 27th April 2016

Momentum investors will tell you that a good indication of the bottom of a particular market is the point at which bad news stops moving share prices downwards.

PA ANALYSIS: Is this the bottom for banks?

The trick of course is figuring out what actually constitutes bad news and what is good news wrapped in disappointment.

When it comes to banks, the news flow has been pretty dire in recent years, even in relation to the rest of the financial services sector. Not only were they the epicentre of the crisis in 2008, but since then they have been the focus of intense regulatory scrutiny, their margins have been hit by falling interest rates and they have been caught with their hands in numerous cookie jars and fined accordingly.

All of which goes some way to explaining why expectations for bank earnings have been so low and why many fund managers are refusing to touch them with a barge pole.

The question now becomes, have they reached their nadir?

There is no doubt that investor expectations are low. As Laith Khalaf, senior analyst at Hargreaves Lansdown put it on Wednesday following the announcement from Barclays that pre-tax profits were down 33% and it had cut its dividend: “Barclays joins Standard Chartered in the camp of beating low expectations for the first quarter. Profits were significantly lower than a year ago, but that is a marked improvement on the £2.1bn loss registered in the fourth quarter of last year.”

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About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



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