UK Bank Stocks Are Undervalued, Says Investment Manager

Banks in the UK have passed their latest stress tests by the Bank of England, leading one investment manager to say the sector is currently undervalued. The Bank of England stated that the stress tests results revealed that the banking system is strong enough to support the economy in the case of a 'severe global stress scenario.' ‘This has been received well by analysts because what it really does show is that the regulator is saying that the banks don’t have to put any more money aside, and therefore they can start lending to a greater degree than they have been up until now,’ said David Battersby, Investment Manager at Redmayne-Bentley in London. Banks stocks in London initially rose on the news. Five banks - Barclays, HSBC, Lloyds Banking Group, Santander and Nationwide Building Society were all found to have sufficient capital. Two banks - RBS and Standard Chartered - were joined to be the weakest lenders, but have taken steps to raise capital. Battersby believes investors are undervaluing banking stocks. ‘With the earnings clarity that this provides, I think income for shareholders should flow through,’ said Battersby.