Most of the large UK banks have reported their half year figures or are about to do so?

Question

Can a potential investor assume that the bad news is out of the way? Or is there more to come? I saw a programme today, saying that each time they lend money, they take out a kind of insurance with a hedge fund. But that the hedge funds are under such pressure for the increased amount of claims, that they may default. What do you think? Go in now, or wait a bit?

Answer 1

The share price is influenced by people's expectations, as well as by the publicly available facts. This is particularly true in a situation like the present, where nobody has the full facts, including the banks themselves. (It seems amazing that they haven't unravelled everything yet.)

If people expect more bad news, the prices will be low. If they think the bad news is out of the way, the prices will start to rise.

So you have to make a judgement as to whether you want to go with the herd or buy in now, possibly too early. Bear in mind that nobody else knows either.

In the long term, banks are sure to do well. Making money is what they do. They're just going through a bad patch now. If you're prepared to hang on for a few years, bank shares are sure to rise again. But if you're looking for a short term profit, it's just a gamble.