Last week, I highlighted a handful of what I believe are the best shares to buy now to benefit from the UK economic recovery. These companies were from three general sectors, construction and materials, hospitality, and engineering.
I continue to believe these sectors, and the companies mentioned in the article, are some of the best recovery plays to buy. However, so I also want to buy exposure to the financial sector. With that in mind, here are three top shares I’d buy right now as recovery plays.
Top shares to buy now
I want to own exposure to all sectors of the banking industry. As such, the first stock I’d buy is Virgin Money (LSE: VM). As one of the country’s premier challenger banks, I think the lender is a growth and recovery investment.
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This may mean it has a bit more risk than the other companies outlined here. But it also means the group may be able to take advantage of opportunities in the market faster than its larger peers.
The economic recovery is already having a positive impact on the enterprise. According to its latest trading update covering the three months to the end of June, deposits increased 3.7%, mortgages increased 0.7%, and personal lending rose 2.5%. The group has also benefited from lower-than-expected credit impairment charges, as a result of the pandemic.
As consumer and business confidence continues to improve, I think the demand for lending from companies such as Virgin Money will continue to grow.
This could also help lenders like NatWest (LSE: NWG). This is one of my top shares to buy now because, as one of the largest lenders in the country, I think it will benefit from any economic recovery.
Once again, NatWest’s most recent trading update shows that the business is making progress. First-half operating profits were £2.5bn, compared to a loss of £770m in the first half of 2020.
As profits have jumped, the state of the group’s balance sheet has also improved. It reported a Tier One capital ratio of 18.2% at the end of the second quarter, that’s around 4% higher than Virgin’s. With so much excess capital, management has started repurchasing shares and hiked the company’s dividend.
Diversification
The final stock I’d buy in the financial sector is Close Brothers Group (LSE: CBG). Like Virgin, Close Brothers is a smaller financial institution. It is also well-diversified. As well as a banking division, the group also owns an asset management business and stockbroker.
As such, I think the bank will benefit from improving consumer and business confidence and improving investor confidence. That’s why I rate the company as one of the top shares to buy now.
While I’d buy all of the above stocks, I’m conscious that the financial sector is facing significant headwinds. These include low-interest rates, high levels of competition, and rising costs. All of these challenges could impact growth rates at these three institutions. Another lockdown may also hold back their growth potential.
But I’d buy all of the above companies for my portfolio today as recovery plays, despite these risks and challenges.
