Barclays PLC And Standard Chartered PLC Are Just Not Cheap Enough

Barclays PLC (LON:BARC) Standard Chartered PLC (LON:STAN) are still overpriced, argues Alessandro Pasetti.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Barclays (LSE: BARC) and Standard Chartered (LSE: STAN) do not have much in common as banking peers go, but their shares are similarly overpriced. Here’s why. 

Background

HSBC and Royal Bank of Scotland were among a group of five banks that were fined for fixing foreign exchange markets, it emerged on 12 November. The total bill stood at £3.2bn. 

Barclays was not included, yet its stock was the worst performer in the peer group that Wednesday. It also lost 1% in the previous five trading sessions. The shares of Standard Chartered outperformed those of Barclays both on the day and during last week.

Should you invest £1,000 in The Income & Growth Vct Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if The Income & Growth Vct Plc made the list?

See the 6 stocks

By comparison, the shares of HBSC rose by 1.4%, while those of RBS were essentially flat in the last five trading sessions. 

Barclays: When Good News Is Bad News

At 232p, the shares of Barclays do not trade on fundamentals. You should pay little attention to trading multiples — read the news instead. 

Barclays surged 8% to 240.8p on October 31, when regulators said it would take longer for banks to lower their leverage ratios. Good news — is it, really, for investors hunting for value? — came only a couple of days after the bank reported interim results, which were not too bad, but failed to impress the market and left the stock virtually unchanged at 223p. Barclays stock has lost about 4% of value since October 31. 

Admittedly, interim results were encouraging. This is not good news, however.

In fact, Barclays will eventually disappoint investors, simply because estimates for earnings growth are unrealistic. If the stock doesn’t surge when the bank beats estimate, well, would you imagine what could be the outcome when and if Barclays disappoints investors? 

Just one bad trading update may push the shares down 5% to 10%. No matter how the bank’s core business is doing, or how the bank will perform in the next few quarters: the spotlight is on litigation and regulatory risks, both of which weigh heavily on the stock, but are not properly priced into the stock. For these reasons, I’d consider a Barclays investment only below 200p. 

Standard Chartered: On A Wing And A Prayer

The shares of Standard Chartered trade at multi-year lows, but this doesn’t mean they are cheap. The bulls argue that based on several trading metrics Standard Chartered stock offers terrific value at 957p, where it currently trades, but I’d point out that anybody willing to buy the bank’s shares would bet on relentless cost-cutting all the way through 2016. Moreover, I’d add that improvement in capital ratios is unlikely, while additional profit warnings should not be ruled out.

The bank has struggled to deliver value in recent times because growth in emerging markets is hard to achieve. Looking ahead, capital ratios may come under more strain. Management isn’t liked very much by investors, either — although changes are taking place. The shares of Standard Chartered have not bottomed out. Quite simply, its shares would be a risky cyclical buy at the wrong time in the business cycle.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Just released: our 3 top small-cap stocks to consider buying in April [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

Here’s why Tesla stock just rocketed 22.7%! Is it time to buy?

This writer wonders whether the news that sent Tesla stock soaring yesterday is a true gamechanger for the electric vehicle…

Read more »

Investing Articles

2 quality UK stocks to consider buying as share prices rally

With UK stocks moving higher, it might look as though investors with cash on hand have missed their chance. But…

Read more »

Investing Articles

How much £10,000 invested in Lloyds shares is forecast to be worth in 12 months

Harvey Jones is looking past today's stock market volatility to see where Lloyds shares may stand in a year's time.…

Read more »

Investing Articles

How Warren Buffett stays ahead of the stock market

When share prices fall, everyone suddenly wants to be like Warren Buffett. But what’s the secret to the Berkshire Hathaway…

Read more »

Investing Articles

Cheap UK dividend shares to consider buying right now

We're only just past the first quarter of 2025, but it already looks like the year could be another good…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

What the heck is going on with the Barclays share price now?

The Barclays share price surged 25% as the market open on 10 April. Once again, the volatility’s been driven by…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

What the devil’s going on with the HSBC share price?

The HSBC share price has actually been less volatile than some of its peers, despite its Chinese operations suggesting it’s…

Read more »