IS it time to buy UK bank shares? Anyone making that case over the last five years has ended up with burnt fingers and egg-on-face.
False dawns have come and gone as brief rallies gave way to economic reality.
Yesterday there was a bump in US treasury yields, which might one day turn into higher interest rates, which ought to turn into higher bank profits, at least in America.
Over here, Barclays shares are in the midst of a mini rally, with a sharp jump yesterday leading to a 4% rise today. The stock is at 134p, up from just a quid one month ago.
So depending on taste and risk appetite, either that means good times are around the corner, or that the bank share rally has already happened and if you missed it, well, too bad.
Across the sector, bank results in the third quarter were both strong and indeed far better than the City had expected.
What no one knows is whether that is sustainable. Losses on bad debts were much less bad than feared, but that might be a blip.
Today’s unemployment stats don’t suggest that banks are about to enjoy sustained good times. Rather, that customer defaults on loans can only increase.
Ian Gordon at Investec struck a bearish note today, rightly praising Barclays for its recent returns but noting that the “outlook remains problematic”.
In his view, even if the Pfizer Covid vaccine sees the light of day “the UK economy is likely to face an extended period of damaging Government restrictions”.
That’s got to be a bigger factor than one day of moves in interest rate markets. So I think the answer to my original question remains, sorry, no.
