Stock Picker

Banking shares endured another torrid week. The US Federal Reserve took further steps to deliver financial stability by unveiling plans to lend up to $200bn on the bond markets in exchange for mortgage-backed securities as collateral.

While this may be acceptable in the short term, in common with the Fed’s other schemes it’s likely to prove inflationary in the long run and ultimately will devalue the US dollar.

Nevertheless, investors reacted positively to the news. But the collapse of Carlyle Capital Corporation, a highly leveraged US fund that invested in mortgage securities, sent shockwaves through the markets and caused banking stocks to lose most of the week’s gains.

Standard Life shares were in favour following an impressive set of results. Its shares saw their biggest rise since the firm’s floatation as operating profits for 2007 rose 41% to £881m. Strong demand for cheap pensions helped to boost returns and its outlook remains positive.

Friends Provident shares were also in demand as reports circulated of a takeover bid by JC Flowers. They look good value right now.

John Goodall is a private client research analyst at stock broker WH Ireland.