The Motley Fool

Barclays share price versus Lloyds share price: which would I buy today?

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.

A brochure showing some of Lloyds Banking Group's major brands
Image: Lloyds Banking Group

Next week might be exciting for long-suffering UK bank shareholders. The UK’s Big Five banks — including Lloyds Banking Group (LSE: LLOY) and Barclays (LSE: BARC) — all report first-quarter earnings. HSBC Holdings leads on Tuesday, with Barclays and NatWest Group finishing on Friday. With US banks reporting bumper profits for Q1, I’m monitoring the Barclays share price and the Lloyds share price to see which offers the better bargain. Here’s what I think.

The Lloyds share price and Barclays share price slip

At its 52-week peak, the Lloyds share price closed at 45.02p on 13 April 2021. Now it stands at 42.62p, dipping 2.4p (5.3%) in a week. Likewise, Barclays shares peaked at 190.34p on 30 March 2021. They have since slid to 183.78p, losing 6.56p (3.4%). Maybe these shares will get an uplift when banks unveil their figures next week? After all, the banking regulator has allowed British banks to resume paying dividends. Also, three of the Big Five are buying back their shares, boosting future returns for shareholders who sit tight. This could provide support for Barclays shares and the Lloyds share price. Already, the FTSE 350 Banks index is the third-best performer of 40 FTSE 350 sectors in 2021, rising 15.5% this calendar year.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Lower loan losses would be good for banks

Across the Atlantic, the Big Four US banks made blow-out profits as financial markets boomed. They also boosted their bottom lines by reversing much of last year’s loan-loss reserves. With UK banks beefing up bad-debt provisions in 2020, some of these billions could flow back, pushing up profits. Again, this could boost the Lloyds share price and Barclays shares. Similarly, if demand for credit picked up in Q1/21 and loan growth resumed, this would be a relief for banks. But if credit keeps shrinking, or loan losses rise, that spells bad news.

British banks are also keen to arrest shrinking net interest margins (NIMs). The NIM is the margin/spread between lending rates and savings rates. In 2020, Barclays UK’s NIM was 2.61%, the best of the Big Five, while Lloyds’ NIM was 2.52% (placing second). If these two banks can sustain or improve their NIMs, then this might underpin the Lloyds share price and Barclays stock. But if NIMs keep falling, that’s another body blow.

Best stocks to buy now: Barclays or Lloyds?

As a value investor, I use company fundamentals to guide my buying decisions. Thus, when weighing up the Lloyds share price, I compare it to peers and the wider market. Here’s how Barclays and Lloyds stack up, head to head.

  2021E Q4 2020 2021E 2021E
  P/E P/B Dividend Yield Dividend Cover
Lloyds 10.8 0.83 4.0% 2.29
Barclays 11.0 0.69 2.9% 3.09

Source: A J Bell

Based on price-to-earnings (P/E) ratio, the Lloyds share price is slightly cheaper than Barclays. Also, Lloyds has a higher dividend yield (4.0%/year v 2.9%), but the Barclays pay-out is better covered by earnings. In terms of price-to-book (P/B) ratios, Barclays offers greater ‘bank for my buck’ (0.69 at Barclays v 0.83).

As a value hunter, Lloyds appears to be better bet for me. But Barclays, unlike Lloyds, is still big in investment banking. And this sector boomed in Q1/21 for US banks. So Barclays might enjoy an extra boost from higher investment banking revenues. That’s why I’m sitting on the fence. Today, I’d happily buy both the Lloyds share price and Barclays shares!

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.