Why you should steer clear of bank stocks

Shares in bank stocks have enjoyed a decent bull run lately. But don't be fooled by the profit figures, says Tim Bennett. The balance sheets are hiding all sorts of nasty surprises.

Until the Cyprus crisis broke, bank stocks were enjoying something of a bull run. Over the past five months, the UK sector had been rising nicely to end January some 30% higher than last October. Since then things have gone a bit pear-shaped, with the sector dropping around 10%.

And that's the way things should carry on going, according to a report by accountants KPMG highlighted by my colleague Bengt Saelensminde in The Right Side newsletter. The bottom line is that decent paper profits which certainly help share prices conceal all sorts of nasties, known in accounting speak as 'exceptional items'.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.