With Barclays (LSE: BARC) (NYSE: BCS.US) having sacked its CEO, Anthony Jenkins, in the last week, now may not seem like the right time to buy a slice of the bank. After all, the company has said that it may not appoint a successor until 2016, which could leave it without a permanent man or woman at the top for six months. And, once they start, there will inevitably be further upheaval as they seek to refresh the bank’s strategy.
However, this uncertainty and understandable question marks appear to be priced in to Barclays’ share price. Certainly, the apparent end of the Greek debt crisis is good for investor sentiment in the short run, but in the long run Barclays appears to offer substantial rerating potential. For example, it trades on a forward price to earnings (P/E) ratio of just 9.7 and this indicates that its shares are very cheap and also price in the uncertainty that is set to increase in the coming months.
Furthermore, Barclays is a hugely profitable, well-run bank that is not enduring the challenges that many of its competitors face. For example, it is not overly exposed to one particular, struggling region and has an efficient business model that is not experiencing spiralling costs. In addition, its bottom line is set to grow at a double-digit rate per annum over the next few years.
Similarly, challenger bank, Shawbrook (LSE: SHAW), is also priced to sell at the moment. It trades on a forward P/E ratio of just 10.8 which, when you consider that its financial performance has been relatively impressive, appears to be a low price to pay.
Of course, the real potential for investors in Shawbrook is with regard to its income prospects. While it is set to yield just 1.1% next year, Shawbrook is expected to pay out just 12% of profit as a dividend in 2016. That’s exceptionally low and, in fact, if it were to pay out a still very affordable 50% of profit as a dividend, it would equate to a yield of 4.6%. As such, it could become a superb income play – especially if it can continue to post strong profit growth.
Meanwhile, wealth management company, Brewin Dolphin (LSE: BRW), has an excellent track record of growth. It has produced earnings growth in each of the last five years, with it averaging 10% per annum during the period. And, looking ahead, more growth is on the horizon, with Brewin Dolphin set to benefit from an improving UK economy and moderately high FTSE 100 to post growth of 11% this year and 13% next year.
Despite this excellent growth profile, Brewin Dolphin still offers good value for money. Evidence of this can be seen in its price to earnings growth (PEG) ratio of just 1.1, which indicates that it offers growth at a very reasonable price. And, with Brewin Dolphin set to yield as much as 4.4% next year, it could prove to be a top notch income play, too.
