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Wednesday, September 07, 2011 10:32:21 AM
Bank Stocks: Favor U.K. In Europe
* Tuesday, September 6, 2011
U.K. banks still face weaker headwinds and risks compared to euro area peers.
U.K.’s mini-debt crisis of 2009 forced the current government (then in opposition) to propose some painful but necessary policy actions. A tough austerity plan involving both spending cuts and tax increases is now hurting households. The consolation, if it is any, is that the pain has helped to pull down U.K. bond yields to historic lows at a time that Italian and Spanish bond yields are at historic highs. This is good news for U.K. banks. They own domestic government debt, but have much less exposure to euro area periphery sovereign debt than French or German banks. U.K. banks are also a full two years ahead of their euro area counterparts when it comes to boosting their equity capital. Admittedly, some of this equity capital came from the U.K. government or was raised in response to government pressure. Nevertheless, U.K. banks will not need to raise capital as aggressively as those in the Euro area. Overall, U.K. bank shares still face fewer risks compared to euro area bank shares. According to our European Investment Strategy service, investors should continue to overweight U.K. banks relative to euro area banks.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110906.GIF
George.
Click on "In reply to", for Authors past commentaries.
* Tuesday, September 6, 2011
U.K. banks still face weaker headwinds and risks compared to euro area peers.
U.K.’s mini-debt crisis of 2009 forced the current government (then in opposition) to propose some painful but necessary policy actions. A tough austerity plan involving both spending cuts and tax increases is now hurting households. The consolation, if it is any, is that the pain has helped to pull down U.K. bond yields to historic lows at a time that Italian and Spanish bond yields are at historic highs. This is good news for U.K. banks. They own domestic government debt, but have much less exposure to euro area periphery sovereign debt than French or German banks. U.K. banks are also a full two years ahead of their euro area counterparts when it comes to boosting their equity capital. Admittedly, some of this equity capital came from the U.K. government or was raised in response to government pressure. Nevertheless, U.K. banks will not need to raise capital as aggressively as those in the Euro area. Overall, U.K. bank shares still face fewer risks compared to euro area bank shares. According to our European Investment Strategy service, investors should continue to overweight U.K. banks relative to euro area banks.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110906.GIF
George.
Click on "In reply to", for Authors past commentaries.
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