On Monday 15 September 2008, shockwaves were sent through the financial world as Lehman Brothers filed for bankruptcy.
The collapse of Lehman Brothers not only caused the banking sector to become one of the most unloved sectors among investors but sent the economy into a precipitous downward spiral, causing indices such as the FTSE All Share to tumble from 2757 on the Friday before the bank went bust to a post-crash low of 1781 on 3 March 2009.
Since the crash, the economy has been on a gradual rehabilitation programme and the FTSE All Share has climbed 95%. Banks too are looking much healthier – after a painful period of write-downs, boardroom turmoil and cultural change, share prices have recovered somewhat from their lows post-Lehman’s, though they still have a long way to go to reach pre-crisis highs.
Against this backdrop, some investors are beginning to re-appraise some UK banks, attracted by the fact that they are now much more conservatively run and transparent businesses.
James Griffin, Portfolio Manager of the Fidelity MoneyBuilder Growth Fund, believes the UK banking industry now offers some rewarding opportunities.
He said: “We believe that the UK banking industry is a fundamentally different place now from what it was like before the trauma of the financial crisis. Further change is likely over the coming years. We are currently witnessing its rehabilitation and a significant shift towards much more stable, cash-generative business models with a lower tolerance of risk. Valuations and returns in the sector are at historically low levels. While I do not expect returns to reach pre-crisis highs, even a marginal improvement will be very rewarding for shareholders given the negative sentiment around the sector.”
daily alternative | alternative news – Five years on from Lehman Brothers are UK banks returning to health?