He said: “Banks are cheap compared to the average FTSE 350 company on a price-earnings basis, but it is also cyclical. At present, banks could be close to operating earnings levels given loan losses are cyclically low. They are still dealing with legacy issues – regulatory fines, FX, misdemeanours – which undermines earnings.”
Conversely, in addition to the aforementioned factors, Message says that there is another upward driver on the horizon.
“The outlook going forward is really starting to improve, and should it get a tailwind from a normalisation of the bond market,” he explained.
“Over the next few years we will be in a gradually-rising bond yield environment, which will be a tailwind for banks. We will start to see a steepening of the curve, and profitability rising as well.”
So it seems that, given the changes made and the numbers that have resulted, there is a case to be put forward for income-seekers making a foray into the UK banking sector.
That said, it depends on who you ask, and most importantly, how you go about it.
