Who said banks are boring?

Royal Bank of Scotland recently release their 2006 results. They were excellent but one statement in particular stunned me. I quote CEO Sir Fred Goodwin: "Over the last ten years total shareholder return has also averaged 18%." That's right, share price gains plus dividends received had resulted in an average yearly gain of 18% over the last ten years.

Eighteen percent! 18%!

How many funds have averaged 18% growth over the last ten years? I would guess less than 5%. In fact many funds don't last ten years as their historic results start to look so bad they get axed and re-branded.

When I was in the unfortunate position of owning an endowment policy I was told that the fund manager was targeting a measly 6% growth a year. I bet that if the fund was invested in the five largest UK banks the annual growth would easily have exceeded 12%. Just thinking about that endowment policy makes me angry so I will move on!

I am starting to wonder why I bother to invest in risky growth companies like eBay and Google when a staid bank like RBS can offer 18% a year. I know that RBS won't necessarily return 18% over the next ten years but then nor will my portfolio of growth shares necessarily.

I would quite like to divide my growth portfolio evenly between HSBC, RBS, Barclays, Lloyds and HBOS and see how it performs compared to the FTSE100. RBS is currently on a 2007 PE of under 10, but if the EPS is growing at 10% and it is yielding 4% it should return at least 14% a year. So it is cheap and safe.

Now is not a good time to my sell eBay and Google holdings as they are currently at low multiples but going forward I will be looking to switch into safe, boring and exceptional banks!