Boring banks

Royal Bank of Scotland (RBS.L) reported their 2005 interim results last week. The results were good so why is it my eyes kept glazing over as I tried to read the report?

The problem with banks is that everything they report is quantitative and dry. BAA can talk about planes and Frontline can talk about oil tankers but all banks can talk about is numbers, numbers and more numbers.

Banks can also be hard to differentiate as they all seem to do roughly the same things, just by different amounts and in different markets.

These are not good enough reasons not to buy banks though! RBS are on a P/E of under 12 and reported profits up 14%, with the dividend up 15%. These numbers are very solid and show why no self-respecting income portfolio should be without a few bank stocks.

Banks have no place in my aggressive portfolio but they are perfect for my mortgage and college fund portfolios. Steady earnings growth is exactly what you want in a low-beta, high dividend account and that is what banks provide. I will be doing my best to stay awake and in time add more banks to these accounts.