Chris Justham, Relationship Manager for Seven Investment Management, joined Tip TV to discuss the UK banking sector.
Shareholders don’t understand where profits come from
Justham noted the great degree of M&A which has caused problems for shareholders, with banks previously having been buying assets left, right and centre, shareholders have struggled to note where the profits are coming from.
Retail banking vs Investment banking
Justham commented on the huge transformation which has seen retail banking booming whilst investment banking is one to avoid for UK banks. He added that retail banking hasn’t been competitive, but we are likely to see retail banks re-emerging as less risk and more of a utility which investors want.
Banking profits to go higher with UK rate hike
To finish, Justham continued by adding how Carney has been drip feeding rate hike information in the same way as Yellen in the US. He argues that if rates go up, there will be a significant chance for profits for banks. Justham highlighted the 77% of all cash held by the big four UK banks under deposit, around £500 billion, and he commented that this margin would increase immediately if rates were to rise.