British banking shares have long been a favourite for investors, offering a relatively stable investment without too many highs and lows.
The 327 year old Barclays bank (LON:BARC) has always been a hot choice, even more so since its navigation of the 2008 financial crisis left it in a markedly better position than other British banks. Lloyds (LON:LLOY), in comparison, struggled with a loss of investor confidence in the wake of the 2008 crash, when the UK government was forced to buy a large stake to protect it from going under.
However the government’s final stake was sold off in May last year, and the bank is back on its own two feet. It remains a firm favourite with customers and investors alike – the group boast 13.2 million online customers, of which 9 million actively use online banking services.
But how do the two compare?
Lloyds P/E ratio is fairly low at 16.17, meaning it could be a cheap buy at the moment. This marginally lower than the Barclays’ P/E ratio, at 19.55 – but with the average company P/E ratio at between 20 and 25, using this indicator both banks seem to be good value for money.
Moving onto the dividend yield, Lloyds stood at 4.10 percent in 2016, the most recent figure available at the time of print. Barclay’s figure, in comparison, looks much weaker, with investors expecting a dividend yield of 1.48 percent. The average dividend yield for a money centre bank is around 2.37 percent, making Lloyds look like the better deal again.
In terms of recent earnings, Lloyds reported a profit before tax for the nine months to September 30th of £4,495 million, an impressive increase of 38 per cent on the previous year. Alongside this was a return on tangible equity of 10.5 percent, up from 7.6 percent last year.
Barclays profit figure, although lower, still shows strong growth; for the same period profit before tax came in at £3,448 million, 19 percent higher than the previous year. Its return on tangible equity was a disappointment for investors, down -1.4 percent, from 4.4 percent in the same period in 2016.
However, Barclays managed to decrease its operating costs by 8 percent over the nine months to £11,087 million, reflecting ‘lower Non-Core costs’. Over the same period Lloyds operating expenses increased, hitting £9,051 million.
Lloyds’ share price has risen 7.92 percent over the past year, whilst Barclays’ has fallen by 8.06 percent. Lloyds is currently trading down 0.74 percent on the day at 70.00, with Barclays down 0.64 percent at 200.45 (1435GMT).