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It’s been another eventful week for UK bank shareholders, myself included. Bank stocks were volatile again after the collapse of three US banks and a Swiss company.
Four bank ‘dominoes’ fall
Two weeks ago, midsize, technology-focused Silicon Valley Bank, Signature Bank and Silvergate Bank all went bust. Last weekend, the Swiss government organized an emergency rescue of swiss creditthe second largest bank in the country.
After two weekends of domino-like falls for these companies, renewed selling pressure hit bank shares on Friday. Clearly, some investors will not risk further bank contagion, even over a weekend.
Bank shares fall
Here’s how the Big Four stock prices soared on Friday:
| Bank | Low | High | Near | Change |
| barclays | 130.06p | 137.74p | 133.90p | -4.2% |
| HSBC | 521.90p | €545.40 | 534.00p | -2.6% |
| lloyds | 44.90p | 46.59p | 45.72p | -2.4% |
| NatWest | 251.50p | 266.70p | 258.50p | -3.6% |
barclays it was the worst performance on Friday, falling 7% in the morning before recovering. NatWest Group it was the second-worst stock, nearing 250 pence at its low point.
When investors panic
As an investor since 1986, I have survived four major stock market crashes. These were Black Monday (October 19, 1987), the dotcom crash of 2000-03, the global financial crisis (GFC) of 2007-09, and the pandemic panic of spring 2020.
Having started writing for this website in January 2003, I have reported the previous three market crashes for Fool’s readers. In 2003, I was incredibly positive and bought UK stocks at low prices to take advantage of the 2003-2007 bull market.
However, while the GFC was in the making, I repeatedly warned of the growing systemic risks in banking. So I sold all but a small fraction of my financial stocks in 2007, leaving before the global banking crisis hit.
Should I be worried?
Based on my 37 years of experience, I am not concerned with the liquidity, solvency or strength of any of the Big Four Banks. To me, this latest crisis doesn’t feel as scary as the carnage of 2008.
Since the GFC, UK banks have grown stronger beyond almost all recognition. Today, they have much more liquid capital available and carry much less risk on their balance sheets. Also, all four were very profitable in 2022, unlike Credit Suisse, which lost huge sums in 2021 and 2022.
What stocks would you buy today?
Since I think the UK banks will recover, which one would you buy now? Here are its basics:
| Bank | barclays | HSBC | lloyds | NatWest |
| change of a year | -20.0% | +2.6% | -7.4% | +8.2% |
| Five Year Price Change | -36.1% | -20.2% | -31.9% | -8.6% |
| Market value | £22.5 billion | £112.3 billion | £31.9 billion | £25.9 billion |
| Price-earnings ratio | 4.8 | 9.3 | 6.6 | 7.4 |
| earnings performance | 20.9% | 10.8% | 15.1% | 13.5% |
| dividend yield | 5.2% | 5.0% | 5.1% | 5.1% |
| dividend hedge | 4.0 | 2.2 | 2.9 | 2.6 |
These price drops exclude cash dividends, which are a key component of long-term returns.
What appeals to me about these stocks is that they all offer dividend yields of more than 5% per year. That’s about a quarter higher than the FTSE 100The annual cash yield of approximately 4%. Additionally, these cash payouts are covered between 2.2 and four times by historical earnings.
Of course, banks’ profits and profits are likely to be lower this year than they were in 2022. Also, a recession could raise bad debts and credit losses, thus hurting banks’ profits.
Still, I would buy all four shares in the bank today, if I had some extra money, that is!
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