UBS beats estimates for quarterly earnings with net profit of 792 million Swiss francs. Meanwhile Deutsche Bank's second quarter profit rises 16% to EUR917 million. James Bevan, Chief Investment Officer at CCLA Investment Management says investing in Europe's banks is an attractive option as the upturn benefits the financial sector. But, he warns, be highly selective.

SHOWS: LONDON, ENGLAND, UK (REUTERS - ACCESS ALL) (JULY 29, 2014)

1. CCLA, CHIEF INVESTMENT OFFICER, JAMES BEVAN, SAYING:

JOURNALIST ASKING JAMES BEVAN: 'Let's start with the banks. Is it too early to get back in?'

JAMES BEVAN: 'No. I think very selectively, one should certainly be looking at the banks. I think Deutsche Bank is cheap. I would also be looking at the other financials in Europe such as AXA and Allianz, which I believe are very well-placed to participate in a cyclical upswing in due course.'

JOURNALIST: 'Just looking at your latest note, you sound rather downtrodden, I must say. The point you make on the UK recovery, the points you make on Europe, and as you've said just now, careful stock selection required. The points you make on the U.S. financial engineering rather than fundamentals driving earnings. How wary are you still?'

JAMES BEVAN: 'I'm very wary. If one wants to look at the UK economy, for example, there's a very big gap between the amount of money that's being spent and the wages growth which we know remains flat on its back. And of course, the piece of the jigsaw that is missing in describing what's going on there are the compensation payments from the banks to consumers which are now largely being spent. An array of this, we have to worry about where is the next growth coming from. In terms of the U.S., for the 56% of the S&P 500 companies that reported at the end of last week, if one cut up the numbers, five spot 1% earnings outperformance against numbers that have been massaged lower. Very importantly, however, revenue less than 1% above. What that means to me is that companies are indulging in buybacks rather than investment. That actually bodes really very bad news for the future outlook for the U.S. economy and therefore, by extension in the market.'

JOURNALIST: 'What are you- in terms of the equity markets, what are you upbeat on right now?'

JAMES BEVAN: 'Yeah, I think it's absolutely the right time to be looking again at Japan. I think Mr. Abe is very serious about getting traction. Japanese equities are cheap, property prices are beginning to rise, and I'm looking very particularly at Toyota and Fuji Heavy Industries. I also think in a somewhat contrarian way, one should be looking again at emerging markets. It's very clear from the June credit data that China has done everything that is possible to get that economy back into the fast lane and I do think therefore, companies like Samsung Electronics, like Hyundai, like Hon Hai Precision, very well-placed to participate in resurgence of sentiment towards emerging markets. And of course, these are companies that had been very well used to coping with deflation over an extended period. And I do worry that Chinese recovery may bring in a further bite of deflation risk to markets overall.'