Time to Buy British Banking Stocks?

British high street banks have suffered beaten-down share prices for more than a decade due to low interest rates following the great financial crisis of 2007-2008. It could finally be time for British banking shares to bounce back.

If you’ve been investing for more than a decade, you’ll know about the devastation that the financial crisis of 2007-2008 wreaked on the British banking sector, causing most banks to be bailed out by each other and then by the government. The subsequent ultra-low interest rate environment hasn’t been kind to banking stocks, but this could be about to change.

What Are the British Banks?

The high street banks you will have heard of, seen, and probably patronised, include Barclays (BARC), Lloyds Banking Group (LYG), NatWest Group (NWG), and Metro Bank (MTRO). While Metro Bank wasn’t bailed out of the 2008 financial crisis in the same way that Lloyds and NatWest were (in their previous incarnations), and while Barclays sought sanctuary in the arms of Middle Eastern investors instead, all the banks have suffered from historically low interest rates since then.

The Technical Case for Buying British Banks

I once edited a book written by an amateur trader who claimed to have made millions by buying stocks whose share prices were bobbing along the bottom before really taking off to become ten-baggers (and more). He gave examples of companies such as Apple, and more recently I can think of Tesla.

Looking at the long-term share price chart for Lloyds Banking Group, don’t you think its flatlining share price looks like the Apple share price before it really took off?

Lloyds Banking Group and Apple long-term price charts (source: Yahoo! Finance)

And looking at the share price chart for NatWest Group, don’t you think its flatlining share price looks like the Tesla share price before it really took off?

NatWest Group and Tesla long-term price charts (source: Yahoo! Finance)

I’m not saying that Lloyds will follow in Apple’s footsteps or that NatWest will follow in Tesla’s footsteps; they’re quite different kinds of stocks. I’m just making the simple observation that share prices sometimes enjoy explosive growth after a prolonged period of stagnation once the right catalyst appears.

The Economic Case for Buying British Banks

So, what could be the economic catalyst that sends bank shares soaring? As I wrote about yesterday, it’s inflation, which is rearing its ugly head in the UK and around the world. When inflation rises, interest rates usually follow, and this can be good for banks even though it’s bad for most other stocks.

Where Can You Buy British Banks Today?

You can buy British banks — or those from other countries if you think the same arguments apply — via an online broker. Here are two of the best brokers we know:

eToro

eToro is one of the world’s leading multi-asset trading platforms offering some of the lowest commission and fee rates in the industry. It’s social copy trading features make it a great choice for those getting started.

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Pepperstone

Pepperstone was founded in 2010 in Melbourne, Australia by a team of experienced traders with a shared commitment to improve the world of online trading. Frustrated by delayed executions, expensive prices and poor customer support, they set out to provide traders around the world with superior technology, low-cost spreads and a genuine commitment to helping them master the trade. Their mission is to create a world of tech-enabled trading where ambitious traders can embrace the challenge and opportunity of global markets.

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