Shares in Barclays PLC (LON:BARC) (LSE:BARC.L), Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L), Standard Chartered PLC (LON:STAN) (LSE:STAN.L) and HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L) are up by at least 18% in the last six months.
This has surprised me to some extent. I felt the potential for uncertainty during Brexit negotiations could peg them back. I also held the view of a Trump Presidency as likely to hurt investor confidence, rather than enhance it. However, a gain of 47% for Barclays, 18% for Lloyds, 35% for HSBC’s shares and 21% for Standard Chartered’s stock has proven me wrong in the last six months.
Their future could be up and down. I still feel those two risks remain high and could yet cause investor confidence to dwindle. However, at the same time the four banks have the strategies to offer long term investment appeal in my view.
HSBC has started an overhaul of its cost base. This could include leaving the UK (perhaps partially) in order to reduce costs, while significant headcount reductions have taken place. This should improve its efficiency, although it has some way to go before its cost:income ratio falls to that of Lloyds in my view. It may be heavily exposed to UK plc after its takeover of HBOS during the GFC, but its business has become relatively efficient in the intervening years in my opinion.
Barclays has a new strategy which could include asset disposals as well as a reduced payout. I feel this is a sensible move to improve its balance sheet/liquidity ratios. Standard Chartered has overhauled its management structure and in my view it will be more capable of taking advantage of growing demand for financial services across Asia.
Therefore, although shares in the four banks have risen in the last six months, I think there’s still investment appeal there for long term investors.