Bank shares are still a good buy

After the great banking bail out and despite economic uncertainty, banking shares are still viewed as a good buy according to six out ten private investors polled by financial website The Motley Fool - Fool.co.uk.

For the six out ten (64%) investors who think banks shares are a buy, buy, buy, taking a long-term view is their strategy.

Confidence in some bank shares seems to have been restored by coordinated government action around the world to support the banks as the life-blood of economies.

Capital strength requirements are being significantly exceeded by the major banks so, even if there are further shocks, balance sheets should be robust enough.

While they anticipate some big blips along the way, the outlook for the major banks that stick to the knitting looks pretty healthy. They'll have less competition than before with many smaller rivals no longer around.

10 great reasons not to invest in banks

However, people contemplating buying banking shares today have completely missed the boat say the one in four (24%) private investors who have no intention of investing in this sector. Looking at how far the share prices have jumped since their 2009 lows, buying now is not buying low - the time to buy was six months ago!

Barclays - up 496%
Royal Bank Of Scotland - up 327%
Lloyds Banking Group - up 176%
HSBC - up 88%

The state of the UK economy, plus the inevitable rise of interest rates from 0.5% will make it even harder for banks to make a decent profit on their lending book. Then there's government intervention, cheaper investment alternatives, the absence of dividends and indecipherable accounts.

Stuart Watson, Investing Editor at The Motley Fool comments: "In the space of just a few months, banking shares went from being boring, predictable blue chips to unmitigated disaster areas. Then came the bailouts, the eye-popping pensions and finally the Asset Protection Scheme to shore up the system.

"The worst could well be over for banking shares and we're now on the long, slow slog to recovery. Despite their villainous excesses of the last few years, we need a healthy banking sector if the economy is to prosper.

"Santander, which owns Abbey, Alliance & Leicester and Bradford & Bingley, issued a solid set of figures with UK profits up a third on last year. The other big four UK banks report their interim results this week, so this will give us an excellent picture of just how robust the banking revival really is."