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Bank results spark investment hope

10 August 2009 / by Rebecca Sargent

Investors have been offered a spark of hope by last week's interim announcements from leading UK banks, says The Share Centre.

Barclays, HSBC and Royal Bank of Scotland all posted profits last week, indicating that the banking crisis may finally be over. Nick Raynor, investment adviser at The Share Centre said:

"Only a few months ago the banking sector was in crisis. Having battled through waves of bad debts and the ups and downs of the market, the banks have emerged battered and in some cases remoulded, but basically intact."

However, Barclays remains a favourite at The Share Centre, Mr Raynor adds: "On Monday the bank posted pre-tax profits of £2.98billion, an eight per cent rise on last year. Barclays doesn't owe the government any money and it has fended off questions concerning its exposure to toxic debt, by passing the FSA's stress test earlier this year."

HSBC also offers hope, as it too announced profits of almost £3billion, although this was around half of the profit made by the bank in 2008.

Lloyds Banking Group was the loser amongst the banks last week, with an underlying loss of £4billion, for which it blamed the merger with HBOS. Meanwhile, RBS revealed a £15million profit, in its "refreshingly honest" results, which revealed that an RBS recovery is not expected until 2011.

Speaking of the investment opportunities posed by the banks' results, Mr Raynor said: "Given the ongoing volatility within the sector we continue to list both Barclays and HSBC as a hold for low-to medium risk investors. However, investors with a bigger appetite for risk, looking to buy within the sector could consider buying Barclays.

"As Lloyds has the biggest exposure to UK consumer debt we are listing the bank as a tentative weak hold and in view of RBS' bleak outlook we are advising investors to consider selling."

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