Shares in the financial sector are very bankable assets at the moment

I suppose we should not be too surprised that the largest company quoted on the London Stock Exchange in terms of market capitalisation is now a bank. HSBC assumed top spot this year as the shares ploughed ahead reflecting sharply higher profits - helped by a strong performance from its Midland Bank subsidiary. Of course, there are those who point to the fact that HSBC is not really a British bank at all. It is The Bank in Hong Kong. But it is probably the truest global player in the financial community that can claim to be a British company.

It is remarkable how the banking sector has assumed such a significant presence in stock market terms. Already the value of bank shares quoted in London accounts for more than 10 per cent of the value of all shares listed. Soon this will increase still further, with the demutualisation of Halifax, Woolwich, Alliance & Leicester and Northern Rock.

The result season just ended suggests the banks are having a pretty good time of it. Cynics, particularly those with long memories, will be concerned that the cyclical nature of these businesses has not ended. This may turn out to be to be less important.

First of all there are the technological developments within banks. Staff are vanishing fast in this industry.

Then there is the broadening of the range of financial services offered by banks. This lessens the dependence upon the strength of the economy and the level of interest rates in terms of determining profits. While retailers in particular look like getting in on the banking act, they are still obliged to buy in a lot of expertise from established players.

Is it too late to fill your boots with bank shares? Well, at 10 per cent plus of the market, no self-respecting portfolio should be without one. The introduction of all these new players may even push shares still higher.

Simon Knott, our own banking guru on the investment management side, fancies Abbey National and Bank of Scotland. Abbey National has been pushing hard into associated financial services and is far more committed to the retail sector, rather than the more volatile - in profit terms - commercial sector. Bank of Scotland has delivered an impressive profits and price performance. It could fall prey to a predator, perhaps from overseas and the recent wobble in its share price, due to problems in Australia, has presented a good buying opportunity.

Our own institutional team (using just a little poetic licence) agree - and add to the list Lloyds TSB, where benefits from the integration and rationalisation of the two core businesses should allow further profit enhancement. Indeed, only NatWest seems out of favour - amazing what a careless trader can do.

One thing is sadly lacking among bank shares though: issuing shareholder perks. Perhaps a cheaper overdraft or lower bank charges might prove a further incentive. Meantime, the UK's largest index classification is a must for all serious investors.

Brian Tora is chairman of the investment strategy committee at Greig Middleton & Co (0171-392 4000)