Banking on good news for investors

As Royal Bank of Scotland (RBS) becomes the latest bank to announce record losses, Nick Raynor, an investment adviser at The Share Centre, suggests that these bad results for banks could mean good news for investors.

He says, ‘Despite the pre-tax loss felt by RBS being the second biggest in banking history, investors should be relieved that things aren't as bad as they feared. Last week the shares were trading up 4 per cent, which continues RBS's strong resurgence after shares hit a low of 144p: an overall increase of 65 per cent since mid-July.

‘Those investors who have been trading the shares may now want to sell out and move on to pastures new, while long-term investors would be wise to continue to hold. Shareholders who backed the rights issue are likely to be smiling the most as they are currently showing a near 20 per cent profit.’

The last two weeks have seen a mixed bag of results for banks. However, Raynor points out that investors in RBS, Lloyds TSB and Barclays should be encouraged by their decision not to cut dividends.

Raynor says, ‘Although RBS's losses were huge, they were not as bad as expected, and the company has gone some way to shore up its debts. Lloyds TSB on the other hand is currently offering good value for investors, and Barclays remains one of our preferred banks given its international operations and large trading arm, Barclays Capital.’


Jennifer Lowe