Banking shares: Who to buy. Who to avoid
Lower business confidence is discouraging companies from borrowing money to spend on expansion
Despite offering returns in excess of their cost of capital, banks which have released their interim results thus far have not seen their share prices recover to pre-downgrade levels. Bank shares gained after reporting slower growth in headline earnings for the six months to June, only to wilt shortly afterwards. A notable exception was Standard Bank, whose shares reached their highest point this year just before the release of its results last week."Standard Bank has probably produced the best set of results thus far, with a strong performance across its business," says Bradley Preston, chief investment officer at Mergence Investment Managers. "A number of headwinds that have challenged the group for a few years, namely their London operation ICBCS and their high IT cost growth, seem to be coming to an end. This was combined with strong growth in constant currency from their rest-of-Africa operations and good cost control." Nedbank was worst hit, plunging 16.6% to R225.20 between i...
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