A quandary for Trader Steve: Should he start buying bank shares again?

For at least the past five years Trader Steve has employed the following method when thinking about buying bank shares: remember what happened last time. Lie down until the mood passes.

He is beginning to doubt this strategy, and may not be alone. Tomorrow Lloyds kicks off the latest bank reporting season with numbers likely to show a lender in good shape.

If economic seas are calm, Lloyds ought to be a dividend-paying machine. It always was before someone had the bright idea of merging it with HBOS.

The shares have been ticking up, edging a further 0.27p forward today at 67.29p. Trader Steve thinks they will motor from here, but he’s been wrong before.

Rising interest rates ought to be good for bank shares, since they tend to make even the most shambolic financial institution instantly more profitable.

Speaking of which, Royal Bank of Scotland fell 1p to 278p on the latest sign that its regulatory problems are far from over.

The Financial Conduct Authority said it could take “further action” over the way it treated small business customers. RBS reports its latest series of calamities on Friday. Buying ahead of that would be bold, say traders.

The oddity in the mainstream banking world remains Barclays. The shares are a clear Buy, said one observer, if the bank can avoid tripping over its own shoelaces. (He used a different word to shoelaces.)

The only reason that bank hasn’t joined the global rally in big bank shares of the past few months is exactly the fear that somehow it will conspire against itself, again.

Chief executive Jes Staley says he won’t sleep at night until the shares trade at book value.

One analyst said: “At this level I am a buyer, but it never will trade at book value because it won’t generate returns that exceed its cost of capital. Sad but true.”

The shares trod water ahead of Thursday’s results, down 0.45p at 195p.

On a desk across town, the sort of place that wouldn’t hire our Steve, dealers said the market was sepulchral. Volumes were light and the FTSE 100 drifted down 7.06 points to 7517.39.

Most interest was focused on Whitbread, down 171p — more than 4% — to 3771p. As far as the City is concerned, Whitbread missed its numbers. “At the moment, when companies don’t deliver what they promise, market makers get increasingly violent,” said one old hand.

Some good news might be needed for shares to keep hitting fresh highs.

Chris Weston of IG said: “I remain a bull, but of the view that these markets are tired, fatigued and need new information to fuel the beast.”