Such disinterest can be partly explained by the continued pressure faced not just by Lloyds but by the sector as a whole – certainly the travails of Deutsche Bank, whose value has halved this year, are hardly a glowing advertisement for investing in a sector that numerous City heavyweights - from Credit Suisse chief Tidjane Thiam to fund star Neil Woodford – have described as ‘uninvestable’. That’s despite the fact that many banks can now be picked up for a mere fraction of their book value, in the case of Deutsche – a systemically important institution once seen as Europe’s soundest bank - less than 30p in the pound. But bank shares are cheap for a reason, even if some of the sector’s troubles are not of its own making – low interest rates make it very difficult to make a decent return on invested capital, and at some point the interest rate cycle may begin to swing up again. Yet if hanging on is the name of the game, survival is hardly a bullish argument, especially when we do not know when the upswing will come.
Even if we could dismiss low rates as a mere headwind, they have exposed just how broken banks really are, financially, structurally and morally. To compound its operational struggles, Deutsche looks like it will be unable to avoid a $14bn fine from US regulators for the sale of mortgage backed securities. Revelations that numerous employees at Wells Fargo, the country’s biggest mortgage lender had committed fraud to boost bonuses has cast a shadow over the US banking industry. And back in blighty, long-running suggestions of impropriety in RBS’s small business restructuring division have resurfaced and could be investigated again. It means support for a class action lawsuit against it may gather momentum, and could result in more heavy payouts to add to the huge redress levied for PPI mis-selling. It all suggests that the damage inflicted by banks' warped profit motive over two decades could mean further nasties lurk within them.
When I took my first job as a bank cashier, bullet proof glass separated us from our customers – it is very troubling to consider that now it is the customers that need protection from banks, and perhaps unsurprising that the government does not wish them to be the standard bearers of a shift to more inclusive capitalism. Nor, I imagine, would history look very kindly on a government that foisted shares in what could be an irreparable sector onto an unsuspecting public.
