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The mention of banks may seem bizarre : with many UK high street names still trading at a fraction of their pre-financial crisis levels , well over a decade after the trouble began , who ever looked at them as solid businesses ? The answer is , quite a lot of people back in 2003 . Graham Campbell , chief executive at Saracen , says : “ Bank shares were often lowly valued and were high dividend payers . They were so dull and boring that many considered them safe investments . Following the global financial crisis of 2007 to 2008 , many banks imploded and either required government assistance or were completely nationalised : shareholders were destroyed . “ Why was this not spotted by shareholders or regulators ? There were two main reasons . Analysts tend to focus on earnings and these were booming for several years , so all seemed fine . They should have been looking at balance sheets . “ Furthermore , lending is a lead indicator to bad debts and prudence was being overtaken by greed . There were mortgages offering 105 per cent
and more above book value , so when the cards collapsed there was no collateral and equity was destroyed .” While the likes of Lloyds and NatWest are a shadow of their former selves , at least they are still standing . Russ Mould , investment director at AJ Bell , points to Bradford & Bingley as an example of a bank that was wiped out completely . Demutualised in 2000 , it entered the FTSE 100 in 2002 on the back of an economic recovery in the UK , driven by light-touch financial regulation and a housing boom . “ However , therein lay the dangers , too , as lending standards became lax across the global banking industry , house prices became overheated and debt provided weak foundations for the upturn ,” says Mould . “ The credit crunch in 2007 to 2008 demolished those foundations and Bradford & Bingley was nationalised in 2008 . Some of the assets were subsequently sold to Abbey National , now known as Santander , and some are still on the government ’ s books .”
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