UK bank shares – worthy investments for 2021?

first_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Ben Watson | Monday, 14th December, 2020 Image source: Getty Images I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Enter Your Email Address I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Simply click below to discover how you can take advantage of this. In the dim and distant past, it was always summer in the season of UK bank shares. Profits were large, growth was constant, and copious dividends were paid to hungry investors. They were the halcyon days of Barclays trading above 600p, Lloyds trading above 400p, and HSBC above 800p.In 2008, the financial crisis hit, and the days of wine and roses were over. Figures such as Bob Diamond and Fred Goodwin became targets for public ire, and scandals continued to loom large over the industry in the following decade. Libor manipulation, PPI mis-selling, and interest-rate hedging were all colossal own goals for the sector. Share prices end the decade close to lows for most of its constituents.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…2021 – A fresh start for UK bank shares?There is little doubt that banks will suffer a hangover from the Covid-19 pandemic. The industry will face a prolonged period of rock-bottom interest rates, and there will be significant provision for bad loans required. However, some banks are better placed than others to weather the storm.Bank of England Governer Andrew Bailey has given an update on banks resuming dividends this week, having previously banned payouts in March. Banks have not had to make provisions for bad debts that were as bad as initially thought. This may free up cash to return to investors and restart dividend payments, albeit under close scruitiny. The challenge for the UK banking sector is to keep a sustainable public image at a time of nationally high unemployment and companies like Debenhams and Arcadia folding. Potential investmentsOf all the UK bank shares, Barclays gives the soundest investment case, in my opinion. The investment bank has performed well this year, and is trading at a discount to other sector members. One positive outcome of the financial crisis was the stress tests that banks are now forced to conduct. As a result, Barclays are significantly better capitalised now. I also like their plans to provide an alternative to the likes of Hargreaves Lansdown with growth of their Smart Investor app. The bank has seen a 230% growth in customers using this platform in the last year.Barclays posted a profit before tax of £1.1bn in the third quarter. Comparisons with the previous year are skewed by the bank’s decision to include a £1.6bn PPI charge in the previous financial year, but it does at least show profitability. Since the financial crisis, Lloyds is a candidate for being the ultimate ‘jam tomorrow’ UK bank share of the FTSE 100. Investors are always led to think that the share price is finally due to head upwards, then reality sinks in again. Over the past five years, shares are down 46%. As a UK-focused bank, they are far more exposed to our home fortunes than sector rivals. Low interest rates will cap profitability for some time. Jonathan Smith does however give a bullish commentary on their prospects.Foolish summaryInvesting is a game. Admittedly, a game with hard earned cash at stake. But investors can use the same principle as for any other games, and try to find the most potential reward for the least risk. Given that, it is hard to see how investing in UK bank shares is a sound proposition for 2021. I will certainly be avoiding the sector and looking to areas of the market less weighed down by incumbent problems. center_img UK bank shares – worthy investments for 2021? bwatson1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. “This Stock Could Be Like Buying Amazon in 1997” Our 6 ‘Best Buys Now’ Shares Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! See all posts by Ben Watsonlast_img read more