FTSE 100 banks, such as Barclays and Lloyds, have experienced a decline in stock prices due to concerns about falling net interest margins (NIMs). However, the current NIMs are still above the average seen over the past two decades in the UK. Barclays and Lloyds trade at lower multiples compared to their US peers, and their return on equity and net interest margin percentages are also lower. Despite concerns about potential credit losses, there is currently no evidence of a hard landing in the housing market or significant job losses. With interest rates expected to moderate and more resilient borrowers, there are reasons to be positive about the banks. The author believes that the discounts on Barclays and Lloyds stocks are unwarranted and continues to hold them in his portfolio.
Barclays shares have fallen by around 14% over the last month. The Q3 results showed credit impairment charges of £433m, higher than in Q3 2022. Barclays is facing challenges from online banks and expects its net interest margin in its UK retail bank to be lower than previous guidance. The majority of its capital is tied up in the lower returning corporate and investment bank. The article does not provide a clear recommendation on whether to invest in Barclays shares.
UK-listed banks in the FTSE 100 trade at a discount compared to their US counterparts. This article explores whether these markdowns are justified. The P/E ratio and P/B ratio are used to assess the relative value of the banks. The analysis shows that UK banks are trading at a substantial discount to US banks, suggesting they are undervalued. Concerns about the impact of a severe economic downturn on credit defaults have weighed on the share prices of UK-focused banks. The PEG ratio, which considers a company's prospects and growth, is also discussed. The author, James Fox, has positions in several UK banks. The Motley Fool UK has recommended some of the banks mentioned. The article concludes by reminding readers to consider their individual circumstances and seek independent financial advice before investing.
The article discusses the author's view on Barclays, a cheap FTSE 100 growth share that they would avoid investing in. The author highlights that while Barclays has an advantage over its UK high street rivals due to its exposure to the US market, the company still generates significant profits from its home market, which could compromise its ability to deliver healthy shareholder returns in the future. The author also points out that the UK economy continues to stagnate, and retail banks like Barclays could struggle to grow revenues, especially with the expected interest rate cuts by the Bank of England. The article mentions that City analysts expect Barclays to increase earnings by 14% in 2024, but the risks to these forecasts are high. The author concludes that the prospect of sustained share price weakness makes Barclays an unappealing FTSE share to buy, and they would rather invest in other cheap passive income shares.
American investors can buy Lloyds (LSE:LLOY) stock through American Depositary Receipts (ADRs). However, if Lloyds' primary listing was in the US, the share price could potentially be higher. UK companies listing in the US often have businesses more oriented to the US economy, which is not the case with Lloyds. However, the trend of UK firms listing in the US may escalate into a significant exodus. Lloyds is currently trading at eight times earnings, while US banks like JPMorgan and Goldman Sachs trade at higher multiples. If Lloyds were listed in the US, it could trade with higher multiples, potentially resulting in a higher share price. However, global investors tend to be cautious with UK-focused stocks due to the stagnating UK economy. Lloyds' lack of an investment arm also makes it less diversified and potentially riskier than US banks. While it is unlikely that Lloyds will shift its primary listing to the US, if it were to happen, the share price could trade at a modest discount to its US peers but at a premium to the current share price.
[896922d2]