36 | SHARES | 24 May 2018
MR MARKET
Scottish Investment Trust fund manager Alasdair McKinnon on why part of
the financial sector is starting to look interesting againBack in black: why banks
are investable once more
T
en years ago, many
of the world’s banks
ǁĞƌĞĞƐƐĞŶƟĂůůLJďƵƐƚ͘
dŚĞŐůŽďĂůĮŶĂŶĐŝĂůĐƌŝƐŝƐǁĂƐ
ŝŶĨƵůůƐǁŝŶŐ͕ĂŶĚďĂŶŬƐǁĞƌĞ
ĨĂĐŝŶŐƚŚĞŝƌĐŽŵĞƵƉƉĂŶĐĞĨŽƌ
ĞŵƉůŽLJŝŶŐŚƵŐĞĂŵŽƵŶƚƐŽĨ
ůĞǀĞƌĂŐĞƚŽďŽŽƐƚƌĞƚƵƌŶƐ͘dŚŝƐ
ƉƌĂĐƟĐĞǁŽƌŬĞĚĨŽƌĂǁŚŝůĞ
ďƵƚƐƵĐŚƉƌĞĐĂƌŝŽƵƐŵĞƚŚŽĚƐ
ŶĞǀĞƌĞŶĚǁĞůů͘
dŚĞĐƌŝƐŝƐĞdžƉŽƐĞĚďĂŶŬƐ͛
ĐĂƉŝƚĂůďƵīĞƌƐĂƐĚĂŶŐĞƌŽƵƐůLJ
ƚŚŝŶ͘/ƚĞīĞĐƟǀĞůLJǁŝƉĞĚŽƵƚ
ƚŚĞŝƌĞƋƵŝƚLJǁŚĞŶƵŶĨĞĂƐŝďůLJ
ŽƉƟŵŝƐƟĐĂƐƐĞƚƉƌŝĐĞƐǁĞƌĞ
ĨŽƌĐĞĚƚŽŵĂƚĐŚƌĞĂůŝƚLJ͘
^ƵĐŚǁĂƐƚŚĞĂŶdžŝĞƚLJ
ŽǀĞƌƚŚĞďĂŶŬƐ͛ƐŽůǀĞŶĐLJ
ƚŚĂƚh<ƉŽůŝƟĐŝĂŶƐƐĞƌŝŽƵƐůLJ
ĐŽŶƚĞŵƉůĂƚĞĚƉƵƫŶŐƚƌŽŽƉƐ
ŽŶƚŚĞƐƚƌĞĞƚ͕ŝĨďĂŶŬƐǁĞƌĞ
ƵŶĂďůĞƚŽĚŝƐƉĞŶƐĞĐĂƐŚ͕ƚŽ
ƋƵĞůůĂŶƵŶĚĞƌƐƚĂŶĚĂďůLJĂŶŐƌLJ
ƉŽƉƵůĂƟŽŶ͘ŽŶƐĞƋƵĞŶƚůLJ͕
ƚŚĞďĂŶŬƐǁĞƌĞĞŶƟƌĞůLJ
ƵŶŝŶǀĞƐƚĂďůĞ͘
tĞŚĂǀĞƐŝŶĐĞĐŽŵĞĂůŽŶŐ
ǁĂLJ͘ ƵƌŽƉĞĂŶĂŶĚh^ďĂŶŬƐ
ŚĂǀĞďĞĞŶŚĞĂǀŝůLJƉƵŶŝƐŚĞĚ͕
ǁŝƚŚƌĞŐƵůĂƚŽƌƐĐŽůůĞĐƟŶŐ
ŚƵŶĚƌĞĚƐŽĨďŝůůŝŽŶƐŽĨĚŽůůĂƌƐ
ŝŶĮŶĞƐ͘dŚĞŽĚĚͲ&ƌĂŶŬĐƚ
ŝŶƚŚĞh^ďƌŽƵŐŚƚĨĂƌͲƌĞĂĐŚŝŶŐ
ƌĞĨŽƌŵƐ͕ǁŝƚŚƟŐŚƚĞƌƌƵůĞƐ
ŐŽǀĞƌŶŝŶŐƚŚĞĂŵŽƵŶƚĂŶĚ
ƋƵĂůŝƚLJŽĨĐĂƉŝƚĂůƚŽǁĂƌĚŽī
ĂĨƵƚƵƌĞĐƌŝƐŝƐ͘LET LOOSE FROM THE NOOSE
dŚĞƉĞƌŝŽĚŽĨƉƵŶŝƐŚŵĞŶƚŝƐŶŽǁĞŶĚŝŶŐ͘dŚĞƌĞŐƵůĂƚŽƌLJ
ĞŶǀŝƌŽŶŵĞŶƚŝƐŵŽƌĞƐĞƩůĞĚ͕
ǁŝƚŚŵƵĐŚƐƚƌŝĐƚĞƌŽǀĞƌƐŝŐŚƚ͘
ŌĞƌĐŽŶƐŝĚĞƌĂďůĞĚĞůĂLJ͕ŽŶĞ
ŽĨƚŚĞĮŶĂůƉůĂŶŬƐŽĨŐůŽďĂů
ďĂŶŬŐŽǀĞƌŶĂŶĐĞǁĂƐĂŐƌĞĞĚ
ŝŶĞĐĞŵďĞƌʹƚŚĞƐŽͲĐĂůůĞĚ
ĂƐĞůκƌƵůĞƐ͘
dŚĞŶĞǁĞŶǀŝƌŽŶŵĞŶƚ
ŶĞĐĞƐƐĂƌŝůLJĐŽŶƐƚƌĂŝŶƐďĂŶŬƐ͛
ĂĐƟǀŝƟĞƐďƵƚǁŝƚŚƚŚĞƌƵůĞƐŽĨthe game largely agreed, the
ďĂŶŬƐĐĂŶƉůĂŶĂĐĐŽƌĚŝŶŐůLJ͘
ĂŶŬƐĂƌĞŶŽǁŝŶŵƵĐŚďĞƩĞƌ
ƐŚĂƉĞ͘KǀĞƌƚŚĞƉĂƐƚĚĞĐĂĚĞ͕
ƚŚĞLJŚĂǀĞƌĞĐĂƉŝƚĂůŝƐĞĚƚŽ
ŝŶƐƵůĂƚĞĂŐĂŝŶƐƚĨƵƌƚŚĞƌĐƌŝƐĞƐ͘
tŝƚŚďĂĚĚĞďƚƐůĂƌŐĞůLJ
ǁƌŝƩĞŶĚŽǁŶŽƌĚŝƐƉŽƐĞĚŽĨ͕
ƚŚĞŝƌďĂůĂŶĐĞƐŚĞĞƚƐĂƌĞĂůƐŽ
ŵƵĐŚĐůĞĂŶĞƌ͘
ĚŵŝƩĞĚůLJ͕ƌĞƚƵƌŶƐŽŶĞƋƵŝƚLJ
are lower today than they were
ďĞĨŽƌĞƚŚĞĐƌŝƐŝƐ͘ƵƚƚŚĂƚ͛Ɛ
ďĞĐĂƵƐĞďĂŶŬƐŵƵƐƚĐĂƌƌLJŵŽƌĞ
ĞƋƵŝƚLJĂŶĚĨŽƌĞŐŽƚŚĞƌĞƚƵƌŶƐ
ŽĨƚŚĞŵŽƌĞƐƉĞĐƵůĂƟǀĞƉĂƌƚƐ
ŽĨƚŚĞŝƌďƵƐŝŶĞƐƐ͘KǀĞƌĂůů͕ƚŚĞ
ŽƵƚůŽŽŬĨŽƌĐĂƐŚƌĞƚƵƌŶƐĨƌŽŵ
ďĂŶŬƐƚŽĐŬƐŚĂƐŝŵƉƌŽǀĞĚ͘INTEREST RATE BOOST
dŚĞŵĂĐƌŽĞĐŽŶŽŵŝĐ“
”
Banks are now
in much better
shape