Henderson manager buys banks

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Henderson, who manages a range of funds including the 283 million pound Lowland and the 417 million pound Law Debenture investment trusts, has increased his funds' borrowings in order to buy stocks and is optimistic lower interest rates will help boost equities over the medium term.

"I'm pretty optimistic. Valuations are relatively low, interest rates are coming down. In a medium term sense it's good for equity markets," he told Reuters.

"With a lowering of rates and the Fed's actions, the financial system ... having come to a grinding halt, is slowly starting to move ... We still think interest rates will be half a percentage point lower by the year end."

A year ago Henderson told Reuters he planned to build up cash levels because many stocks were no longer attractively valued.

Over the past year the FTSE 100 .FTSE has fallen 5.5 percent, but the index is up 8.4 percent over the past three months, boosted by hopes interest rate cuts in the United States and Britain will help revive economic growth.

Henderson said he has been buying banking stocks such as Barclays Plc and Lloyds TSB Group Plc and plans to increase Lowland's exposure to the sector to between 15 and 16 percent from 12 percent.

"The core loan book in corporates isn't going to deteriorate hugely. Corporates are generally quite strong balance sheet-wise and they have got interest cover," he said.

"People expect big pick-ups in corporate bad debt, but our view is that it won't happen."

Barclays has underperformed the FTSE All Share .FTAS by 32 percent over the past year and is now on a multiple of 7 times forecast earnings, while Lloyds has underperformed by 20 percent and is on a multiple 8.3 times, according to Reuters data.

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