For investors in Barclays (LSE: BARC), the present time may seem like a rather uncertain one. After all, the bank sacked its CEO, Antony Jenkins, a matter of weeks ago despite him having appeared to have done an excellent job of improving the bank’s efficiency and delivering a more attractive risk/return profile within its asset base. And, with the bank seemingly happy to take its time in finding his successor and rumoured to be on the cusp of announcing savage job cuts, its future may appear to be difficult to determine.
However, Barclays remains a superb investment at the present time. Not only is it moving in the right direction in terms of improving its efficiency, it is also becoming increasingly profitable. Ultimately, this is what the market is seeking in any company; an ability to grow earnings at a fast rate is likely to lead to an upward rerating. And, on this front, Barclays looks set to impress, with its bottom line expected to be almost two thirds higher in 2016 than it was in 2014.
This puts it on a forward price to earnings (P/E) ratio of just 10 which, for a major UK bank that is not part-nationalised and has an excellent track record of profitability, seems unjustly low. Moreover, with Barclays’ share price having risen by 10% in the last three months alone, market sentiment seems to be on the up, which makes now a great time to buy a slice of the bank even though its future is somewhat uncertain.
Meanwhile, the future for money lender, Provident Financial (LSE: PFG) is also uncertain. It has benefitted from ultra-low interest rates, with demand for new loans having soared in recent years and the ability of individuals to repay them being made easier by rising employment levels and low inflation in recent months. As such, the expected rise in interest rates during the next year could cause investor sentiment to come under a degree of pressure in the short term.
However, for longer term investors, Provident Financial continues to have huge appeal. For starters, interest rates are unlikely to rise at a rapid rate, with the Bank of England having pointed out on several occasions that rate rises are likely to be slow. As such, Provident Financial is forecast to post a rise in earnings of 20% this year, followed by 10% next year and this puts it on a highly appealing price to earnings growth (PEG) ratio of just 1.
Also offering excellent growth prospects is Arbuthnot Banking Group (LSE: ARBB). It is forecast to increase its earnings by a whopping 69% this year, followed by growth of 28% next year. This puts it on a PEG ratio of just 0.4, which indicates that an upward rerating is very much on the cards. Furthermore, Arbuthnot could become a top notch income play, too, since it currently pays out just 29% of profit as a dividend. As such, its current yield of 1.8% could rise – especially with the bank being expected to post such strong profit growth.