Banks stand out in cautious domestic environment

ON UK INCOME

Insight Investment's Tim Rees explains why he is bullish on financials.

There are reasons to be more positive despite fears induced by government cuts, as employment and domestic demand is proving remarkably resilient and companies are increasingly talking about the recession in the past tense. Banks also appear to be more comfortable with their provisioning profile and confident about mortgage persistency, and they are reiterating their willingness to lend and move up the risk curve in their lending book. However, in the face of limited annual deposit growth of only 3%-4%, banks’ lending is constrained. The UK banking sector may therefore find, at curren...