Is now a good time to buy bank shares

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Q: Most banks' shares are offering great yields at the moment. Is it a good time to buy them? And if you had to choose, say, two companies' shares, which would you, prefer to put your cash into? (I fully understand the risks involved with stock market investing).

A: Interest-rate sensitive stocks, like Financials, have risen on the back of a relatively small correction in oil prices. The latter, though, is structurally high and looks to continue that way. Looking at the Broker Forecasts for Barclays and RBS, they are both receiving a cautious "weak buy" recommendation, although Citigroup has upgraded Lloyds TSB to a "Buy" at 338p. If you were to twist my arm, I would buy these three. I am not enthusiastic on the Banking Sector as a whole, because of continuing Oil Price strength, relative to last year, shortage of capital, the inability of Central Banks to solve the funding problem, further expected writedowns of debt and failing Rights Issues.

Answered by:

Paul White
IFA
Belgravia Insurance Consultants