Bank stocks battle: Should I buy Barclays or Lloyds shares?

Risk reward ratio / risk management concept

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Bank stocks have performed exceptionally well over the past year. The rise in interest rates has helped boost earnings for the major players, with H1 results showing some impressive gains. The two are major competitors. Barclay (LSE:BARC) and Lloyds Banking Group (Lessie: Loy) Which of the two should I choose now for my investment cash in the culture war?

Lloyd’s case

Lloyds has the largest UK retail customer base of any of the major banks. This can be seen as a risk or an opportunity. Given the risk it presents, retail clients are very sensitive to how the economy is doing. Individuals can quickly consolidate their card spending, credit inquiries, and other bank-related products.

However, I see the retail fundamentals as where I want to buy Lloyd’s shares. Shares have risen 7.9% in the past year, despite a sluggish UK economy. This suggests that the benefit from higher interest rates may offset lower consumer activity during this period. Then, when the recovery comes and with it a prosperous period, Lloyds should be able to achieve better results in terms of the retail customer base.

Another reason I’d book Lloyd’s over Barclays is because of the dividend yield. Currently, Lloyds has the highest yield at 4.47% (Barclays at 3.63%). with FTSE 100 With an average yield of 3.9%, I can see the benefit of choosing for income.

In recent half-year results, it became clear to me that the increasing dividend per share is part of a strategy to return to pre-pandemic levels as quickly as possible. This production may even go higher in next year’s time.

Why Barclays is a better bank stock.

One of the reasons Barclays shares have underperformed recently is a trading error that cost the bank billions. The oversupply of some structured products meant that H1 profit fell by 24%.

After looking into the matter, I don’t believe this is a fundamental problem for the bank, even though it was a stupid mistake. So, with the share price down 4.2% over the last year and a price-to-earnings ratio of 4.59, I think it’s better value than Lloyds. I believe the stock price can shake off the one-time financial crisis and rally in the coming months.

Barclays has a diversified network operating in over 40 countries. It serves all types of clients including funds, corporates and high net worth individuals. If I want to spread my risk, Barclays seems to be the best option. For example, if the UK really struggles but other countries in Europe do well, Barclays will be less negatively impacted than Lloyds.

My last thoughts

I should have some free money to invest in the coming weeks. With that, I think I’d vote for Barclays shares. I feel I could get better value at current prices with less faith in the uncertain UK economy.

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