Thomas Watts, investment analyst at Cumberland Place Financial Management, is also taking a close look at financials, but from a more global perspective.
“It’s good news for banks if we see inflation and a rate rise, and it’s the US where the banking sector really dominates with decreased regulation and the repeal of the Dodd-Frank act,” he said.
“I’m sure the banks will still harbour a few skeletons in the cupboard but we are still positive.
“In Europe in particular, post the Italian referendum it will be interesting to see how the likes of Banca Monte de Paschi fare. When you look at the non-performing loans it is well known that the banks have problems.
“There are also problems for the continent’s largest, Deutsche Bank, with the German government saying it won’t bail it out of any future troubles.
“While French banks haven’t deleveraged their balance sheets as much as they could have done, if we look at BNP on a valuation basis it trades around 9x earnings, and that’s attractive for a company that kicks out a decent yield as well.”
From a stock picker’s perspective, Watts points to the likes of Schroder European Income, which holds ING, and Neptune European Opportunities as those funds looking to profit from the sector.
