ANALYSIS | UK BANKS
WHILE banker bashing has become something of a national sport here in the UK, it has had little discernible impact on the share prices of our largest financial institutions, which have posted strong performances since their lows in the first quarter of 2009.
The partially nationalised banks, RBS and Lloyds Banking Group, have seen their share prices surge 402 per cent and 75 per cent respectively from their lows. The stronger banks of HSBC, Barclays and Standard Chartered are up 100, 333.5 and 207 per cent.
With the first quarter earnings season already under way, traders might well be wondering about the sustainability of these performances, especially given the backdrop of tighter regulation proposals. But contracts for difference (CFDs) traders shouldn’t be so quick to sell their positions in UK banks.
Lloyds is scheduled to give a trading update today while Barclays will publish its first-quarter numbers on Thursday morning at 7am. HSBC and RBS will both announce their first quarter updates on 7 May.
In spite of the steep rise in their share prices, many analysts still think that the UK banks are undervalued and should therefore continue to perform well as the economy improves.
Lloyds’ performance has been helped by its unscheduled trading statement last month, which declared that the bank expected to make a profit in 2010.
Bank of America-Merrill Lynch reckons that RBS could see its share price double over the next couple of years because of earnings upgrades and the bank could be making a return on equity of 18 per cent by 2013. This is good news for the taxpayer although uncertainty about what the next government will do with its stakes may cloud the outlook.
Barclays avoided state help and has since gone from strength to strength; it is forecast to announce a £2bn profit for the first quarter and its prescient acquisitions should continue to underpin the share price.