Mundy: Why cheap banks are still too risky to buy

Investec's Alastair Mundy has warned against investing in UK banks despite historically low valuations, with the threat of nationalisation looming large over leaders in the sector.

The manager of the £450m Investec Special Situations fund, as well as the £1.9bn Cautious Managed portfolio, said, with the exception of HSBC, he is avoiding all banking stocks in the UK because of the ongoing risks they face. "Banks look cheap, but before they exhibit that cheapness they could go bust," he said. "There is a significant risk they could be nationalised if credit markets become dysfunctional again, and to us banks have got value trap characteristics." Mundy's Special Situations fund aims to buy shares which have fallen sharply in value - usually by at least 50% - and...