Is the UK banking sector ripe for profit-taking?
As investors come to terms with the fact that a Middle East investor sold 1.3 billion Barclays bank shares at more than 10% under the market price, many are now suggesting the initial stage of the UK bank sector recovery may be over. We have seen Barclays bank shares bounce from well under a pound to the current level and many investors who took the plunge in the company's darkest hour have made significant returns.
However, we have seen signs that business is not picking up for UK banks and liquidity may be about to dry up for a second time. There is also the fact that UK unemployment still continues to rise with some people forecasting in excess of 3 million people by the end of next year. Unfortunately, the UK economy, despite showing some signs of life, is still struggling to stay afloat. Against this background we are likely to see a significant increase in bad debts, IVAs and bankruptcies all to the detriment of banking profits in the UK.
As a consequence of the economic situation and the 1.3 billion share sale in Barclays bank it looks as though many investors and analysts are reconsidering their positions.
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