A safer option is this: UK bank stocks are not a good deal

The banking industry in Britain is extremely vulnerable to political threats

According to Terry Tanaka, you should instead invest in this global financial trust.

Some have said that the sale of the government's remaining stake in NatWest, which occurred after 17 years, was good news for the banking industry. They claim that the state is now off its back and that the stock overhang has been eliminated.

You can't rely on it. Rather, this might signal the start of the government's banking reforms in the UK, which would include increased taxes, more regulation, and support for new crackpot compensation plans conceived by irate customers and lawyers who pursued complaints.

The clever plan by Reform to save 35 billion by the Bank of England (BoE) stopping to pay interest on deposits held at the central bank by UK lenders is even more pernicious. The government will most likely adopt this proposal because it is so naive.

By taking their deposits out of the BoE and either lending to the private sector at any interest rate they could find or investing in short-term gilts, the banks would try to offset the income loss. While the latter would lower borrowing costs for the private sector, the former would lower yields in the near term, assisting the government in funding its borrowing needs. Market interest rates would no longer be under the BoE's control, which is the catch.

Inflation and currency depreciation would spiral out of control due to the stimulus to monetary growth, and neither the government nor the Bank of England could stop it. Banks would be severely impacted by the decline in revenue, the boom that ended in numerous bankruptcies, and the decreased foreign exchange value of their stock.

The Polar Capital Global Financials Trust (LSE: PCFT) is a better option for investors. Nearly 90 percent of the trust's assets are invested outside of the UK: 40 percent are in banks (JPMorgan holds the largest share at 7 percent), 18 percent are in insurance, and 38 percent are in financial services like Visa and Mastercard. Over the course of a year, the portfolio has returned 19 percent, 54 percent, and 118 percent. Now might be a good time to move from UK financials to PCFT, as NatWest, Lloyds, and Barclays have all done significantly better than that.

Avoiding bank stocks.

In the past few years, PCFT managers Nick Brind and George Barrow have drastically decreased their exposure to banks. Three years ago, they held 59 percent of the portfolio in the banking industry, and two years ago, they held 49 percent.

According to Brind, "some banks are fantastic businesses, but we think there are better opportunities elsewhere."

He claims that although the sector has done very well and that valuations have increased, earnings have outpaced the market in terms of growth. "When we first started, twelve years ago, the industry was trading at a fifteen percent discount to the overall market; today, it is trading at twelve times earnings, or eleven times, if data-service companies like Visa and Mastercard are excluded. This represents a market-based 30% discount.

A lot of risk has been moved off-balance sheet, but banks have been forced to clean up their act since the 2008 financial crisis, which has led to a general mistrust of financials among investors. The financial system has significantly increased its capital and liquidity, and both corporate and household balance sheets have strengthened, but the industry is still unpopular.

Lower interest rates and more lenient regulations in the US and Europe would help the industry. Brind states, "We think a very bad macroeconomic situation would be necessary to stop the sector's relative outperformance."

The price of PCFT is 5% below its net asset value (NAV). Every five years, it gives the option to redeem at NAV; the most recent redemption reduced the market capitalization by over 40% to 350 million. Fees have been lowered, and a revised dividend policy now pays out 4% of NAV annually.

Polar Capitals Global Insurance Fund is another attractive investment that is worth taking into account. It has yielded returns of 223 percent over ten years and 98 percent over five.