Indeed, on the market open, shares in the bank that is looking to sell out of a number of geographies in order to focus on its US and UK offerings rose 4%, although they did moderate over the day to close 0.5% higher.
Standard Chartered shares jumped significantly after it released numbers on Tuesday, after it too beat low expectations.
As AJ Bell’s Russ Mould explained it: “while Standard Chartered’s jump in share price appears counterintuitive, this behaviour can be explained by analysts’ pessimistic profit forecast. Group revenues fell 24%, profits before losses on bad loans fell 43% and stated pre-tax profit slumped 59% to $589m (£404m), but these figures merely lived down to a low set of expectations. In fact, analysts have been busily cutting their numbers for all five of the FTSE 100’s big banks.”
Indeed, according to Rob James, banks analyst within Old Mutual Global Investors’ UK equities team, the UK banks sector is currently very cheap.
“The sector is beginning to look interesting. The bad stuff is behind us, the capital ratios look strong, the PPI debacle looks like it is coming to a close and dividends are beginning to restart. I think we are reaching a bottom here,” he said.
Bank shares have indeed fallen pretty hard and, while much pain has already been seen, some of the headwinds, in particular, the low growth, low interest rate environment that is putting pressure on margins is likely to remain. And, as Khalaf points out, in the case of Barclays, investors are no longer getting paid as much to wait for the better times.
That is, of course, the other trick with bottoms, just because you have found the bottom doesn’t mean there is any idea as to when things might start improving.
