Barclays shareholders certainly aren’t smiling – the stock trades today at around the 170p level, having sat at closer to the 240p mark three months ago. Meanwhile the Libor scandal threatens to have more far reaching consequences.
Many private investors, burnt by the last financial crisis, have sensibly steered clear of banks since, though the financials sector remains something of an obsession for many fund managers. UK funds from big names such as Standard Life, Jupiter and Artemis have all held their fair share in Barclays, though perhaps understandably they have been unwilling to comment to the press.
No witch hunt
Still, this is not a witch hunt and as John Husselbee, CIO at North Investment Partners, puts it, many index-aware UK managers will have a holding in either Barclays or any of the other giant banks that have permanent residence in the FTSE 100. You cannot enter the profession today without making clear your views on the sector.
“You are not going to get a healthy equity market without a strong financial market; the two go hand in hand,” says Husselbee.
“It is very rare to have a sustained market rally without financials doing well because they are very much the heartbeat and the blood inthe circulation which keeps the economy going.”
HSBC is often cited as the, ahem, diamond in the rough of the banking sector given its strong balance sheet and relatively healthy deposit-to-loan ratio. Still, its stock too has had a turbulent 12 months, underlining the point that financials performance often correlates with the wider market movements.
Specialist fund struggles
The two best-recognised specialist financials funds available to UK investors, Jupiter Financial Opportunities and Henderson Global Financials, have both registered double-digit losses in the past 12 months. These funds both of course cast a wider reaching net than just banks, though it’s clear that sentiment towards the sector remains poor. Distrust is certainly rife among investors across the food chain.
“This proves once again that banking sector is too big to fail, too big to manage and too big to regulate,” remarks Husselbee of Barclays’ predicament. It’s clear the banks have a long way to go to reassure investors in the City and beyond.
