After 14 Fifa officials were arrested in an anti-corruption swoop in Switzerland, that country’s beleaguered banking system was sure to come under scrutiny yet again — but would it drag in any UK banks?
The answer to that is a big yes, after the FBI named Barclays (LSE: BARC)(NYSE: BCS.US), HSBC Holdings (LSE: HSBA)(NYSE: HSBC.US) and Standard Chartered (LSE: STAN) in its indictments — although the banks are not accused of any wrongdoing.
Investigations
According to the BBC, Standard Chartered has confirmed that it has started an investigation into the possibility of its having been used for corrupt payments, though the other two declined to comment.
With Barclays only just having been hit with a record $2.4bn fine over its part in the Libor-rigging scandal, and HSBC still reeling from earlier allegations that its Swiss arm helped wealthy customers evade tax and having been stung by a $2bn fine for US malpractice, are we looking at a possible threat for shareholders?
As of yet there’s no suggestion that the banks, three out of a total of 14 named, have knowingly connived in any corrupt payments, although they’ll surely be carefully scrutinizing their records for any hint of illicit payments connected to the arrested individuals.
Who cares?
But even when banks actually are guilty of venal misbehaviour, the perhaps shocking truth is that the investment world really doesn’t seem to care — banks are amongst the most lucrative generators of cash ever, and a few billion in fines here and there is merely a gnat’s bite when compared to long-term lucre.
Barclays shares, for example, were pretty much unmoved by the Libor-rate fine, and from last summer’s low point the price is now up nearly 30% to today’s 270p — and that takes into account the complete lack of movement resulting from the weekend’s Fifa news.
No, with strong earnings growth forecast at Barclays for this year and next, with the shares on a forward P/E of 11.5 and dropping to 9.5 for 2016, and predicted dividend yields coming in at 3-4%, I reckon Barclays is still a great investment.
Avoid China?
HSBC and Standard Chartered are still on attractive fundamentals, too, but with growing fears of a Chinese crash that could unsettle both of them, I’d steer clear for now.
And I really don’t think the Fifa probe is going to be anything for shareholders to worry about.