Is Now A Good Time To Invest In Bank Stocks?

Bank share prices in the UK have been falling during the past 12 months, as inflation soars and a recession seems inevitable. With prices seeming relatively cheap at the moment, is now a good time to invest in bank stocks?

What’s Happened To Bank Share Prices?

Share prices for financial institutions have been fluctuating since the Covid-19 pandemic. While they had just about recovered from their lockdown losses, banks are again suffering.

The general economic climate has led to a dip in profits for shareholders. For example, over the past 12 months, shares in Barclays are down 19%. The economic crisis of 2022 has taken its toll on the recovering market.

While Barclays is just one example, the overall picture is the same for the majority of banks. However, perhaps the most surprising news is that since the recession became almost a given, UK bank stocks have started recovering slightly.

What Are Private Investors Doing?

The stock market doesn’t thrive on unknowns, so when the recession was simply a threat, share prices were going down. It seems investors feel better about knowing what’s likely to happen, even when it’s bad news.

Although technically the UK isn’t yet in a recession, the warning signs say it’s about to happen. Investors are doing their research and basing their strategy on their personal circumstances. Many view the banking sector as one to go for during a recession.

Some investors are abiding by the old adage that a period of “maximum pessimism” is the best time to buy, while a time of “maximum optimism” is a good time to sell.

During the Covid pandemic, everyone was panicking and dumped a lot of bank shares. Investors who purchased then could be sitting on some useful gains in the long term.

If you bought shares in Barclays in 2020, you would have still doubled your money, in spite of the renewed hardship of 2022. Many investors believe if they find a price that represents long-term value, they’ll buy now.

The forecasted dividend yields in the banking sector are between 4% and 4.7%. Considering it’s a sector that has traditionally brought in good cash flow over the longer term, many investors see this as an attractive option.