UK bank bashing could make investors wary, leading fund manger claims

News - Banking

Monday, 14 December 2009 11:43

The one-off super tax on bank bonuses and other higher taxes on the rich announced by the UK government risks being seen as bank bashing and could make investors wary, it is claimed.

It will be seen by some as the government going too far in its bid to check the banking sector, according to leading fund manger Philip Gibbs, famous for turning a profit for his £1.4 billion Jupiter Financial Opportunities Fund in the midst of last year’s market meltdown.
‘One is a bit suspicious that there is a general mood to bash the banks, which makes one a little bit edgy as an investor. There is a lot of competition and companies can clearly move around to other locations,’ he said.

Gibbs said the prospects for the financial sector remained strong, benefiting from the general recovery in global markets. ‘Valuations (in the sector) are clearly attractive and interest rates are also going to remain low for some time. We are seeing all sorts of evidence of a recovery in the world economy and the financial sector is clearly geared towards that as people push more into equities, so it is a major beneficiary of this situation,’ he explained.

Gibbs said that among financials he favours HSBC because of its Far-East slant and DnB NOR due to Norway's strong economy and extraordinary government finances, as well as investment banks because of low capital constraints and flexibility to de-gear.
‘Lloyds, for example can’t exactly de-gear. Their core business is lending to corporations and consumers and it’s very difficult for them to de-gear, especially if the economy is doing badly. But the investment banks can survive on fees and trading and don’t actually need to have such big balance sheets,’ he said.

He pointed out that companies have indirectly benefited from the crisis. ‘These are companies like Barclays, Goldman Sachs, HSBC and Credit Suisse that have come out of the crisis strongly because their competition has been weakened,’ he added.

His financial fund, which has over 70% in banks, has returned 875.19% since its launch in June 1997, according to Lipper data, and is ranked first out of the total universe of 689 unit trusts.