UK’s Best Bank Shares to watch in 2023 – that will be the topic of today’s article.
Explore the UK’s best bank shares to watch in 2023 and consider them in your portfolio management.
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This article isn’t financial, or any other sort of advice.
Table of Contents
Introduction
In today’s article, I am going to shed some light on the banking sector of the UK and what are the best stock picks.
The banking stocks in the UK haven’t been favorable to most individuals for a very long time.
Most analysts have been the naysayers in terms of their opinion on the investments made in the banking sector of the UK.
According to some internet sources, it has been said that the great recession was one of the main reasons for the banking sector’s inefficient performance.
Because of the recession that happened in 2008, the banks were forced to function at low interest rates.
However, some sources claim that the scenario has changed since the end of the year 2021.
The base rates for the banks have risen to 3.5%, which means a likely positive outcome would result in a higher rate by the end of 2023.
Keeping the “interest rates” aspects in mind, one of the most commonly asked questions among many investors is that “is it a good idea to invest in banking stocks?”
To answer that, let’s take all the aspects again into careful consideration (regarding the banking sector).
Because of the circumstances, it is true that the banking sector in the UK had to face a lot of negative opinions from investors.
Let us discuss all the scenarios that had such an impact on the banking sector in the UK.
To begin with, the financial crisis in 2008 and its consequences had a great amount of impact on banking stocks.
A few years following that, there was the Brexit situation, which resulted in the under-performance of the UK stock market.
This continued for a couple more years, and then there was the COVID-19 situation that shook the markets all over the world.
This not only led to a decrease in many stocks all over the world, but it also led to the drastic downfall of UK banking stocks.
Following all these years of low interest rates, or should I say drastically low interest rates, central banks decided to rise interest rates. This was done as a measure of dealing with rising inflation.
Because of this reason, the interest rate of the Bank of England has significantly risen nine times the interest rate in 2021.
This would generally create anticipation among most analysts that the interest rate can expect an increase this year as well.
However, we should also consider the fact that the past performance of a sector or a stock does not imply the future.
Based on the aspects like increasing the number of deposits and increasing repayments of loans, it can be safely assumed that we can expect the bank shares to perform well.
Let us have an insight into some of the best banking shares in the UK and some other details related to their performance.
Kindly note that this is not actual investment advice, but instead, this information is provided for educational purposes.
This is also not the data that ranks these banks in the order they’ve been listed, it’s just for reference.
HSBC Holdings plc
HSBC Holdings plc, which is traded as LSE: HSBA, is said to be one of the good stocks available for buying.
It is a banking and financial services company that is known to offer services globally.
Different segments of the business activity of HSBC Holding plc include:
— Personal Banking
— Wealth Management
— Commercial Banking
— Global Banking
Being founded in the year 1865, HSBC Holdings plc is a player who has been in the industry for quite some time and is headquartered in London.
The market cap of this company is said to be around $148.63B and the revenue was reported to be $46.23B.
According to some of the reliable sources on the internet, it is said to be trading at a value that is 40% less than its fair value.
Adding to that, the earnings are said to see a growth of more than 14% this year (2023).
Given below are some of the key aspects of HSBC Holdings plc, which help in determining whether or not the stock is a buy.
— Unstable dividend track record.
— The company is currently profitable.
— The earnings of this company are expected to grow at least by an average of 14% per year.
— The share price of HSBC Holdings plc has been stable for the past three months.
— The profit margins of HSBC Holdings plc are said to be improved.
— Because of the sufficient financial data available, analysts can make suggestions.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
— There is not enough data to determine the financial position or insider trading information (for the past three months).
Talking about the company, this industry-leading company was established in Hong Kong in 1865.
Compared to all the European banks, HSBC Holdings is said to have the highest number of assets under management with more than $15 trillion.
In the middle of the COVID-19 scenario in 2021, the company slowly shifted its concentration towards Asian countries while drawing away from the UK and the USA.
In that situation, the company cut more than 35,000 jobs in those regions and started to acquire smaller banking groups in India and Singapore.
After having a significant amount of concentration in Asian countries, HSBC started the Communist Party of China committee. This was started in the Chinese investment banking department of the company.
Even though it was against the likes of UK regulators, this seems like it could open up exposure toward an affluent market from the view of investors.
According to stats obtained in July 2022, the shares of HSBC Holdings have outperformed the FTSE 100 index, despite the economic hardship during that period.
However, you should always remember the fact that the past performance of a company should not be taken as an indicator of the future.
Note that this is just the information gathered from internet sources, which cannot be considered actual investment advice.
By the time of writing this article, i.e., February 17, 2023, the share price of HSBA is 621.3 GBP.
NatWest Group
NatWest Group, which is traded as LSE:NWG, is another bank share in the UK that is worth watching in 2023.
The subsidiaries of NatWest Group cater to retail, corporate, commercial, and institutional clients in the UK and other countries.
It is said that NatWest Group has around 800 branches and 16,000 physical centers located all over the world.
Formerly, NatWest was known by the name of The Royal Bank of Scotland Group plc and is headquartered in Edinburgh, UK.
Coming to the main aspects of the share, it is said to be traded below 50% of the estimated fair price determined by some analysts.
The earnings are said to expect a growth of up to 10.87% per year, which has grown by 35% compared to the previous year.
Most analysts claim that the price will at least grow by 30% by the end of this year.
Just like HSBC Holdings, this share is also said to have an unstable dividend track record.
The market cap of this company is said to be around $35.59B and the revenue was reported to be $12.46B.
Some of the features to be taken into consideration while talking about the shares of NatWest Group have been listed below.
— Unstable Dividend Track Record
— The company is currently profitable.
— Earnings are anticipated to experience a growth of at least 10% for the next three years.
— The share price is also said to be stable, especially considering the past three months.
— Improvement in the profit margins.
— The financial data regarding the company is also available, which is sufficient for analyst recommendations.
— There are significant events recorded, which might affect the performance of this share in a negative way.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
— We weren’t able to find out the details regarding the financial position or the insider trading information (for the past 3 months).
While having a customer base of more than 19 million, NatWest Group is the largest business banking service provider in the UK.
While offering the best-in-class banking solutions, it also focuses on environmental sustainability goals.
NatWest Group is also behind the companies that assist other businesses in achieving their environmental goals.
More than 60% of the bank’s retail customers opt for interactions with the bank through digital services.
Considering the business activities, 2021 was definitely a good year for NatWest. However, this company was also forced to face difficulties just like most other companies in the year 2022.
But over the past 12 months, the shares of NatWest rose over 15%, which makes it the second-best bank (considering the returns) after HSBC Holdings plc.
With a considerable amount of dividend growth as well as an average yield of 4.5% in 2022, most investors are starting to look favorably toward NatWest Group.
Note that this is just the information gathered from internet sources, which cannot be considered actual investment advice.
By the time of writing this article, i.e., February 17, 2023, the share price of NWG is 285.62 GBP.
Lloyds Banking Group plc
Being a banking and financial services company in the United Kingdom, Lloyds Banking Group plc is traded as LSE:LLOY.
The services offered by Lloyds Banking Group plc are related to the segments given below.
— Retail Banking
— Commercial Banking
— Insurance
— Wealth
All these services are offered by Lloyds Banking Group plc through its subsidiaries, which are:
— Lloyds Bank
— Halifax Bank
— Bank of Scotland
— Scottish Widows
Founded in 1695, it is one of the oldest banking entities present in the UK and is headquartered in London, UK.
Lloyds is said to be traded at a value below 49% (approx.) of its fair value according to some analysts.
These analysts also claim that the company is set to grow at least 1.82% in value per year for the next three years.
Most analysts claim that the stock price will increase more than 27% this year.
The market cap of this company is said to be around £35.69B and the revenue was reported to be £16.2B.
A few key features to be taken into consideration while talking about the shares of Lloyds Banking Group plc has been listed below.
— Unstable dividend track record.
— There has been some insider selling activity in the past 3 months.
— Lloyds Banking Group plc is currently profitable.
— The share price of this company has been stable for the past three months.
— There was a decrease in the profit margins of Lloyds Banking Group plc, but it was not at a significant level.
— The available financial data of Lloyds Banking Group plc is enough to make analyst suggestions.
— There are concerning events that might affect the growth of this company in a negative way.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
Being one of the major banks, Lloyds bank plays a significant role in the finance sector of the UK.
As the company generates a majority of its income through mortgage lending services, Lloyds Banking Group even entered the real estate market.
It is now in collaboration with the top real estate developer Barratt Developments and is said to acquire 50,000 plots by 2030. This would probably make it one of the top 10 real estate developers in the region.
Through such type of diversification of assets, the bank will secure its chances against a recession.
Once they start offering deals for the houses developed by them, for which the loans are also offered by them, sales can be generated in an efficient manner.
Note that this is just the information gathered from internet sources, which cannot be considered actual investment advice.
By the time of writing this article, i.e., February 17, 2023, the share price of LLOY is 50.91 GBP.
Barclays
Barclays is a financial services company that caters to clients from various countries along with the UK, which is traded as LSE:BARC.
The regions covered by Barclays PLC are the UK, Europe, the Americas, Africa, the Middle East, and Asia.
Barclays PLC operates through two of its divisions namely Barclays International and Barclays UK.
The services offered by Barclays PLC through its subsidiaries have been listed below.
— Retail Banking
— Credit Cards
— Wholesale Banking
— Investment Banking
— Wealth Management
— Investment Management
Founded in the year 1960, Barclays also has had its presence for a while now, and it is said to have more than 87,000 employees.
The name of Barclays Bank Limited got changed to Barclays PLC in 1985, and the headquarters is located in London, UK.
According to some analysts, Barclays PLC is said to be trading for a value less than 60% less than its fair value.
The earnings of this bank are expected to grow by 3.12% per year over the next three years.
Another great aspect of this company is that the shares are being traded at a good value on par with the peers in the same industry.
The market capital of Barclays is said to be £27.564b and the revenue is £23.74b.
Given below are some of the key aspects that should be taken into consideration while deciding whether or not this is a good buy.
— Unstable dividend track record.
— The company is currently profitable.
— The share price of Barclays PLC is stable for the past three months.
— There has been a decrease in the profit margins of this company, yet it is not substantial.
— With the financial data made available, analysts are able to provide suggestions.
— There are concerning events that might affect the performance of the share of Barclays PLC in a negative way.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
— We weren’t able to find out the details regarding the financial position or the insider trading information (for the past 3 months).
The firm is said to have made between £5b and £8b starting in 2018, only from the credit cards division.
Considering the poor performance that we witnessed in 2022, the valuation of this company has been made attractive.
Being listed on the LSE, and being a part of the FTSE, this share is one of the cheapest blue-chip banking stocks available for investors.
When things get better, we can surely hope for a comeback from Barclays, and therefore, it is definitely worth watching.
Note that this is just the information gathered from internet sources, which cannot be considered actual investment advice.
By the time of writing this article, i.e., February 17, 2023, the share price of BARC is 170.50 GBP.
Banco Santander SA
Being the 16th largest international bank in the world, Banco Santander, S.A., or Santander Bank is also one of the banks worth watching.
It is traded as LSE:BNC.
This bank offers services related to retail banking and commercial banking and serves various clients on a global scale.
The P/E (Price to Earnings) ratio of Santander Bank is 6x, which is below the UK market of 13.8x.
Some analysts claim that the earnings of this company are expected to grow 2.38% per year over the next three years.
Compared to the past year, the earnings of this bank grew by 27.1%. It is yet another bank that is being traded at a good value compared to most of its peers in the same industry.
Most analysts over the world agree that the share value of this bank might increase by 21.9% by the end of this year.
The market capital of Santander Bank is said to be £52.454b and the revenue is £41.27b.
Let us look at some of the key aspects that are to be considered while determining whether or not this share is a buy.
— First of all, there has been a significant amount of insider selling for this bank.
— Unstable dividend track record.
— The company is currently profitable.
— The share price of Santander Bank is stable for the past three months.
— Considering the profit margins, BNC is said to have become profitable.
— Based on the financial data available, analysts are able to provide suggestions.
— There are no concerning events that might affect the performance of the share price in a negative way.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
Since 2015, Santander Bank is said to have acquired more than 32 million new customers, while making the total customer base to be 153 million.
Even while doing so, the company managed to have a steady income that didn’t fall below €20 billion since the crisis that happened in 2008.
The year 2021 is said to be one of the most profitable years for Santander Bank while being able to generate €15.3 billion.
The regions covered by Santander Bank are known to have customers with a higher repaying ability. Keeping that in mind, we can hope for the company to grow further in the future if the circumstances aren’t against it.
One major drawback of Santander Bank is that the company falls back in digital services compared to its peers. This aspect of Santander Bank is said to be being taken care of, which might also add up to the positivity.
It is a notable aspect that in the year 2021, 54% of the total sales were generated with the help of digital services.
Note that this is just the information gathered from internet sources, which cannot be considered actual investment advice.
By the time of writing this article, i.e., February 17, 2023, the share price of BNC is 313 GBP.
Bottom Line
I am saying this again. All the information has been gathered from some reliable sources on the internet.
For example, the data regarding market capitalization, revenue, and share price were taken from Yahoo Finance, which is reliable for those numbers.
Kindly note that by the time of reading this, the stats might have changed, and therefore, you should not take this information as an actual reference.
At the same time, all the information provided within this article is provided for educational purposes, and therefore, none of the readers should consider this as investment advice.
It is wise to contact your investment advisor or financial planner before making any investment-related decisions.
If you are a DIY investor, then you should account yourself responsible for any of the investment decisions you make.
Having said that, I strongly hope that the information provided within this article proved to be helpful to you in finding the information you needed.
If you are looking for an efficient financial planner or wealth manager who can attend to your needs, you have come to the right place.
I offer tailored investment solutions, which range from high-net-worth wealth management services to investment-related services.
If you want to know whether or not you can benefit from the services that I offer, then feel free to get in touch with me.
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