Dear Mr. Berko: Most American banks have recovered from the Great Recession. But banks in the United Kingdom have not. I have $30,000 to invest, and I’d thank you for a recommendation of three British banks for my individual retirement account.
— LB, Ann Arbor, Mich.
Dear LB: A few hours in a flying machine will take you across the pond to the United Kingdom, home of MI6, Shakespeare and the following three banks.
Lloyds Banking Group (LYG-$2.81), a $17 billion-revenue bank with 75,000 employees, has been conducting business with Londoners and people of the world since 1695. In the early part of this century, LYG traded in the mid-$40s. The Great Recession tanked this prestigious name to $2.50. LYG is the fourth-largest bank in the U.K. and pays a seemingly well-covered 16-cent dividend, yielding 5.8 percent. Since early 2015, Lloyds has notably restructured itself. This includes a reduced reliance on wholesale funding, a new focus on retail and commercial business models, and nearly 100 percent growth in its credit card business via its keen 2017 acquisition of MBNA. Some believe that LYG is positioned to meet the challenges Brexit poses to its operating theater. They surmise Lloyds could be a winning speculation by 2021 and believe that the risks are diminished by a potential share price of $15. And some Britons think that Brexit fears are overblown. So buy 3,000 shares and earn a splendid dividend, which could increase over the coming years, while waiting for principal growth. Be that as it may, I can’t find an American brokerage that has a “buy” recommendation on LYG. Nevertheless, a 3,500-share speculation augurs well from this side of the pond.
Barclays (BCS-$8.22), with $20 billion in revenues and 90,000 employees, is the second-largest bank in London Town. In mid-2008, just before the recession whacked the world’s financial markets, BCS tranquilly traded in the mid-$50s. It savagely tumbled to $5 a share in 2009. This 122-year-old bank went through several difficult years of restructuring, which included settling with the U.S. Department of Justice over its residential mortgage-backed securities business. In 2017, BCS posted earnings of 30 cents a share, and this year, BCS expects to earn $1.08 — on a trifling increase in revenues. Management expects 3.2 percent revenue growth and earnings of $1.25 to $1.28 next year. Meanwhile, the covetous 26-cent dividend, yielding 3.1 percent, may be raised in 2019. A few BCS-watchers presume the board will increase its dividend in each of the next two years. Though Brexit headwinds may cause a slowdown in the British economy, BCS’ well-diversified business — locally and geographically — should buffer those winds. The shares trade at half their $18.10 book value, and a projected share price increase to the high $20s by 2021 is realistic. Standard & Poor’s, Morningstar and Jefferies have “buy” ratings on BCS. A 1,200-share long-term speculation could be promising.
