Why investors shouldn't shun UK banks

ON SPECIALIST MARKETS

No matter which sector you are focused on at the moment, the turmoil in Europe is having an impact and that is certainly the case with financials.

The packages that have been suggested are all intentions there is still a long way to go before the details are worked out. The more immediate risks in the European banking sector are the extent of sovereign bond write-offs and the possible dilution due to new capital raisings. Even if banks do not raise capital, they will probably have to shrink to a desired capital to risk weighted asset ratio – this will impact earnings negatively going forward. So while some banks may seem cheap on the surface, once this has been factored in, they are actually much more expensive. That is why th...