Here’s how your peers are investing during the banking crisis

We asked you how the banking crisis had affected your investing strategy and where you were putting your money to work now. Here are the results of our latest poll.

Years spent rebuilding following the financial crisis put the global banking industry in a much better place, one where it would be able to survive future shocks. That was put to the test by the pandemic, which lenders were able to navigate without major casualties. Now, the sector has perhaps an even tougher test following the spectacular collapse of Silicon Valley Bank and the rescue of Credit Suisse (SIX:CSGN) by local rival UBS (SIX:UBSG).

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This is not yet a systemic banking crisis, and world leaders and central banks have scrambled into action, offering words of reassurance and providing vast quantities of financial help. So the global banking system is not quite on the brink of collapse, but public confidence is easily lost and hard to win back. Fears about contagion relate not just to financial institutions, but also to the behaviour of customers who need only a whiff of trouble to trigger a run on a bank.

Shares in popular local lenders like Lloyds Banking Group (LSE:LLOY), Barclays (LSE:BARC) and NatWest Group (LSE:NWG) had recovered a significant chunk of their Covid losses up to the beginning of February this year. Then, in just a few short weeks after news of Silicon Valley Bank broke, significant gains were wiped out.

Between the 8 and 24 March, Standard Chartered (LSE:STAN) fell 24.8%, Barclays 20.7%, HSBC (LSE:HSBA) 15.3%, NatWest 11.5% and Lloyds 11.4%. Others in financial services and insurance fared little better.

But in adversity there is often opportunity. Top investors like Warren Buffett love a stock market crash and the chance to pick up great companies at cheap prices. Regular investors are also rewarded with tranches of stock acquired for less.

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We were interested to hear about your take on the banking crisis and whether it was an event worth buying into.

A poll on the interactive investor website, which ran from 27 March to 29 March, generated 1,568 responses to our first question Is the banking crisis affecting how you invest? and 1,308 for the second Where are you investing fresh funds into UK shares currently?

Over half (57%) of respondents said the banking crisis hadn’t affected how they were investing, but that means 43% had adjusted their behaviour.

Interestingly, 12% are avoiding bank shares completely now, while the same number think this is an opportunity to buy them. Again, with equity investing more broadly, 10% are keeping their powder dry for now, while 9% are picking up bargains in other sectors that have fallen in the sell-off.

In terms of where investors are allocating fresh funds into UK shares currently, 37% of respondents said they weren’t investing in UK companies at all right now. Either this means they’re investing overseas, or are holding cash, perhaps until market conditions become less volatile, or in anticipation of further share price declines.

Of the remainder who are investing in the UK, banks are the most popular individual sector at 10% followed by mining and insurance. This tallies with our daily trading statistics which show these sectors making up half today’s top 10 trades on the interactive investor platform - Lloyds Banking, Legal & General (LSE:LGEN), Barclays, Glencore (LSE:GLEN) and Aviva (LSE:AV.) – where there are more buyers than sellers.

• Daily Trading Flash: 10 most-traded shares 29 March 2023

Source: interactive investor website poll from 27-29 March

Source: interactive investor website poll from 27-29 March

Richard Hunter, interactive investor’s head of markets, explains the impact of this recent banking crisis further. He says: “Some investors are considering whether the recent share price falls are too good an opportunity to miss in providing an attractive entry point. This may well prove to be the case, but this strategy is fraught with risk given the current fragility of sentiment.

“While there is little question that UK banks are in good shape, particularly compared to the markedly different events leading up to the Global Financial Crisis, any further shocks within the sector would be heavily punished. Global authorities including central banks have been at pains to point out the capital strength and access to liquidity which the established banks have, which has been of more recent comfort to investors.

“In the meantime, there is an element of investors being paid to wait ahead of any share price recoveries. Strong capital strength has recently been reflected in additional payouts to shareholders, either by way of share buybacks or indeed generous dividend yields. For example, Standard Chartered currently yields 2.5%, HSBC 4.8%, both Lloyds and NatWest 5.2% and Barclays 5.3%.”