February 8, 2013 6:39 pm

Bank shares unbowed

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A pedestrian walks past a branch of the Royal Bank of Scotland (RBS) in the City of London©Reuters

It may have been a week that most senior bank executives would prefer to forget, but shareholders have come through it largely unscathed.

On Monday, the government confirmed that it will implement the “ring fence” between retail and investment banking, as proposed by the Independent Commission on Banking, and open up the UK’s payments system to facilitate competition and encourage new entrants.

Barclays said on Tuesday that it would set aside a further £1bn for mis-selling, both of payment protection insurance and interest-rate swaps. On Wednesday, Royal Bank of Scotland was fined £390m – in line with most expectations – for its part in the rigging of Libor. There has also been renewed speculation about how RBS will be returned to public ownership.

The prices of bank shares – most of which performed very strongly in 2012 – finished the week little-changed. TD Direct Investing, one of the UK’s largest execution-only brokers, said that trading in Lloyds, RBS and Barclays shares was up 50 per cent this week compared to last.

“We are neutral on the sector as a whole. We prefer asset managers such as Aberdeen, Schroders and Close Brothers,” said Jonathan Newman, banks analyst at stockbroker Brewin Dolphin, pointing out that for shares in the core UK retail banks to regain their historic highs would require “some very challenging price-to-book ratios”.

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