Is the Time to Invest in Banks approaching?

boralas

I want to invest in the banks. I have read much of this thread but I assume some things have changed since this thread started.

I already have a spread of investments, so my eggs will not all be in the bank basket.

I know these things are not exact, but the question always asked is "how much" risk are you willing to take and "how much" return are you expecting. So here are some:

I am looking for a share investment that offers:

1. Downside: Only, say, a small (10%) chance of losing ALL the money - i.e. bank goes broke or shares are worthless. Most likely worst downside, no more than 50% loss. Anything better is acceptable as a reasonable risk.
2. Upside. When the economy returns to health again, anticipate share price at least three times more than it is now, so £1 now = £3+.
3. Timescale. Allowing 10 years for the investment to come good.

Do any of the UK banks look like they would fit this?

I know the Government has shares in RBS and Lloyds, but even in RBS the stake is only £20b and Lloyds £14.5b. But pre-downturn RBS could make £9b a year pre-tax and Lloyds £4b. So why isn't it a realistic expectation for the banks to buy out the Governments stakes out of 3 or 4 years future profits? Does no-one think the ecomony will be booming again in 5 or 6 years time, and the banks raking in profits again?

Doesn't everyone always need banks? And banks in a growing economy always make money?

Why is everyone still thinking the banks are such a high risk and low future share price expectation?

sabretoothtigger

RBS made billions one year then lost 20 billion the next, it wasnt really ever a profit just a delayed mistake and they wont be repeating events since they are selling their non uk assets now
It might be the group is completely broken into separate parts to realise as much money as quickly possible

boralas

sabretoothtigger wrote: »

RBS made billions one year then lost 20 billion the next, it wasnt really ever a profit just a delayed mistake and they wont be repeating events since they are selling their non uk assets now
It might be the group is completely broken into separate parts to realise as much money as quickly possible

So you don't see any likelyhood of £3 a share within the next 10 years? If RBS is broken up, does that mean my 'acceptable eyes-open' risk of still at 50% loss over 10 years is the more likely scenario?

I know it sounds like I'd be better off putting the money on a horse if I'm after some risk, but I'm not looking to lose it all, just willing to accept that a 50% loss over 10 years is a risk worth taking, if the potenial upside is 300% - again over 10 years.

I've already got trackers, some in property, and other low risk modest return investment. If I keep all my other savings in a bank and it goes bust anyway, I lose it, so I figure I may as well have it in bank shares and get some of the upside if it ever comes!

cardsharps

boralas wrote: »

2. Upside. When the economy returns to health again, anticipate share price at least three times more than it is now, so £1 now = £3+.
?

You're falling into the fatal invetors trap of assuming that what share price goes down must go back up again. It doesn't.

Also they've thrown billions of new shares around like confetti so you aren't comparing like with like.

sabretoothtigger

So you don't see any likelyhood of £3 a share within the next 10 years?

Look at the market cap not the price. Broken up is better then broken down, I just meant Natwest is probably worth alot of money maybe 20bn if there was buyers for it. Lots of possibilitys, I dont think rbs would be 25p in 10 years time





http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=50090&action=constituents&username=&ac=

chopperharris

Heres my take on the rbs share price for you , im sure stt will correct if I am wrong , and yes im on the boat ...might be titanic , might be hms profit.

peak price was 7 quid a share , there was rights issues , govt purchase of 70 percent , the shares have been diluted in their worth by more than 70 percent....then theres the selling of asssets which affects income therefore profitibility.Of course you have to add theres no dividend on this too.

Top end price is 120p imo , so at current price you could double your money , but no more and definately not 300 percent.

However what rbs need to do to reinflate the shares value that have been diluted ,say buy back of the first 1/3rd of hmg shares in a staged way , this will rework the share price on an upward spiral.Until this is realised by the money men , from hmg and rbs, that this is the ONLY way for the first phase then it will sit in the doldrums.

boralas

sabretoothtigger wrote: »

Look at the market cap not the price. Broken up is better then broken down, I just meant Natwest is probably worth alot of money maybe 20bn if there was buyers for it. Lots of possibilitys, I dont think rbs would be 25p in 10 years time





http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=50090&action=constituents&username=&ac=

Not sure I follow. I understand that the market cap is important. But what is 'broken up' better than 'broken down'. Nat West is part of RBS, so if Nat West gets sold, is that good or bad for RBS shares?

You don't think RBS will be 25p in 10 years? Do you mean 25p is too gloomy, or that even 25p is too optimistic?

Maybe I should look at Lloyds instead? Or is there a good fund that will spread across the banks? Or should I forget banks altogether?

Like I said at the outset, I'm willing to accept a fair amount of risk, say losing 50%, but for this the upside needs to be a worthwhile return; say the chance to exit with 300% profit at some point over 10 years.

sabretoothtigger

Probably best to look at all the banks and all shares even. Theres no good reason to invest in them because they advertise on telly and other ftse100 shares dont

Selling a company would be the opposite of buying it, how much do they get for it and what were its prospects for growth in earnings. Barclays sold off one of their divisions for funding earlier this year and they got a good price on it, overall the shares gained from the companys improved positioning I guess

sabretoothtigger

Lloyds expects to have saved £700m by the end of the year and it remains on track to deliver more than £1.5bn in annual cost savings by the end of 2011, more than 10 per cent of the group’s combined cost base.
But analysts believe that, in reality, cost savings will be even higher. In another in-market merger Santander, the Spanish bank, managed to cut 17 per cent of costs when it acquired Abbey in 2004.
Lloyds certainly got HBOS at a knockdown price in an all-share deal.

“Lloyds paid £8bn for £18bn of net book value, so the attractiveness of that deal, which gives 25 per cent of the market, can only been judged in two-to-three years’ time,” said one banker

http://www.ft.com/cms/s/0/061c1134-a086-11de-b9ef-00144feabdc0.html?nclick_check=1






The big formation here is bullish, its a strong recovery (obviously we noticed this ) but the reason this guy went short as he suspects a failed move may occur or weakness in the strength & a readjustment to the price.

Which is fair enough that after a big rise a fall of some sort becomes more probable

Barclays is currently showing signs of exhaustion after its massive rally from a double bottom @ 50p back in March 2009.
Have these banking stocks come up too far too soon, the chart will tell us all.
Barclays is surrently forming an inverted head and shoulders formation, please see chart.
resitance area @ £3.90
support area @ £2.60
If we fail at £3.90 and we are already seeing early signs of failure, then my downside target is £2.60. the back drop is not looking good fore equities with the huge run up, some consolidation is long over due.

http://www.benzinga.com/users/wallstreet1928



My own take is 260 is too negative, its the bottom of the support range and large price volume start to register from 300 through to 260.
If the barclays price falls below 360 it will be weak short term which confirms his speculation here I guess







Above is TA, chart stuff and voodoo trading. Below is a discussion of barclays background, fundamentals and prospect sentiments






http://online.wsj.com/article/SB125322233998520905.html

cwcw

cwcw wrote: »

I will make a pledge here and now, based purely on my own personal hunch: RBS, Lloyds, and Barclays will all still be trading as private companies in 6 months time. All of them will have share prices at least 10% higher than their levels as of today.

I will quote myself in 6 months ish time on this. :beer:

Slightly later than 6 months, more 8 months, but I just remembered to revisit this pledge. :beer:

If only I had put my money where my mouth was. I'd have 5 - 6 times multiplied my investment.