Overall, Schroders fund manager for Equity Value Nick Kirrage said the team favoured UK banks “mainly based on valuation but also on the fact that over the last 10 years things have changed and people haven’t noticed”.
“The risks to banks have changed. I can’t think of another sector that has been de-risking every year for the last nine years,” he said.
“A lot of sectors did it for three years then started issuing more debt, more gearing and went back to where they were before, whereas banks are being stress tested every year and getting ever more capital.”
Kirrage said that while banking was a cyclical sector it was also “one of the best places in the world to defend against whatever may come”.
“We spend a lot of time talking about the opportunity set available today, but it might come down to how we act when those choices change,” he said.
“You make all your money in a bear market, you just don’t realise it at the time.”
The Share Centre’s Spooner added the sector was hit hard by Brexit and “struggled to make any headway” last year.
“Regulatory issues, provisions for past misdemeanours and economic conditions, continue to impact or act as a drag,” he said.
“There appear to be two schools of thought amongst sector commentators. One is to remain on the side lines for the time being, while others suggest that much of the bad news is now reflected in the price of the shares and that long-term value exists.”
HSBC, which represents 6.37% of the UK blue-chip index, steps up to deliver results next week Thursday (4 May).
