After a wild week, is it safe to buy UK bank shares yet?

It’s been a frustrating week for UK bank shareholders, myself included. Bank stocks are volatile again, following the collapse of three US banks and one Swiss business.

Four banking ‘dominoes’ fall

Two weeks ago, mid-sized tech-focused Silicon Valley Bank, Signature Bank and Silvergate Bank failed. Last weekend, the Swiss government launched an emergency rescue Credit Switzerlandthe second largest bank in the country.

After two weekends of corporate dominoes, renewed selling pressure on bank stocks on Friday. Clearly, some investors will not take chances with further banking contagion – not even at the end of the week.

Bank stocks go down

Here’s how the Big Four stocks fared on Friday:

Bank	less	upper	Close	Change it
Barclays	130.06 p	137.74 p	133.90 p	-4.2%
HSBC	521.90 p	545.40 p	534.00 p	-2.6%
Lloyds	44.90 p	46.59 p	45.72 p	-2.4%
NatWest	251.50 p	266.70 p	258.50 p	-3.6%

Barclays was the worst performer there, tumbling 7% in the morning before rebounding. NatWest Group was the second worst stock, nearing 250p on the low.

When investors panic

As an investor since 1986, I have survived four major stock market crashes. These are Black Monday (October 19, 1987), the dotcom bust of 2000-03, the global financial crisis (GFC) of 2007-09, and the spring pandemic panic of 2020.

After I started writing for this website in January 2003, I reported on three previous market crises for Fool readers. In 2003, I was incredibly positive, buying British stocks at low prices to ride the 2003-07 bull market.

However, when the GFC was created, I repeatedly warned about the systemic risks in banking. So I sold all but a small portion of my financial holdings in 2007, walking away before the global banking crisis hit.

Should I be worried?

Based on my 37 years of experience, I am not worried about the liquidity, solvency or soundness of the Big Four banks. For me, this latest crisis is not as terrible as the 2008 massacre.

Since the GFC, UK banks have been strong beyond almost all recognition. Today, they have greater liquid capital at their disposal and have lower risk on their balance sheets. In addition, all four are very profitable in 2022 – unlike Credit Suisse, which lost large amounts in 2021 and 2022.

Which stocks should I buy today?

When I believe UK banks are going to pull back, who will I buy now? Here’s the basics:

Bank	Barclays	HSBC	Lloyds	NatWest
Change a year	-20.0%	+2.6%	-7.4%	+8.2%
Five-year price changes	-36.1%	-20.2%	-31.9%	-8.6%
Market value	£22.5bn	£112.3 billion	£31.9bn	£25.9bn
Price to earnings ratio	4.8	9.3	6.6	7.4
Earnings yield	20.9%	10.8%	15.1%	13.5%
Dividend yield	5.2%	5.0%	5.1%	5.1%
Close the dividend	4.0	2.2	2.9	2.6

That price drop does not include cash dividends, which are a key component of long-term returns.

What drew me to these stocks is that they all offer 5%+ annual dividends. That’s about a quarter higher than FTSE 100annual cash yield is about 4%. In addition, this cash payment is guaranteed between 2.2 and four times by historical earnings.

Of course, the bank’s profit and income will be lower this year than in 2022. Also, the recession can lift the bad debt and loan losses, thus affecting the bank’s profit.

Even so, I would actually buy all four of the bank’s shares today – if I had any spare cash, that is!