The best British stocks to buy last year included the big banks. FTSE 100 giants such as Lloyds Banking Group had a cracking 2025. But as we head further into 2026, could this be the year the smaller banks make it big?
Looking at the prospects for TBC Bank (LSE: TBCG), I think it just might.
The rises in big banks’ share prices mean their dividend yields have fallen. HSBC Holdings offers the best of the top bunch, but with a modest forecast 3.9%. And right now, TBC has a much fatter 6.7% on offer. That’s even with the share price up over 30% in the past 12 months.
Let’s get the clearest risk out of the way. The company might be listed in London, but its business is mostly in Georgia, with operations in Uzbekistan ramping up. Should we expect the same level of corporate governance and banking regulation in those countries as in the UK? I don’t know.
But the stock valuation might just make up for that. And then some. Forecasters expect earnings per share to grow around 35% between 2024 and 2028. That puts the shares on a forward price-to-earnings (P/E) ratio of only 6.2 for the 2025 year. And it could drop to under five by 2027!
Remember when Lloyds was down around that level and turned out to be a no-brainer buy in hindsight? Full-year results are due on 20 February. It’s got to be worth considering among candidate stocks to buy, right?
FTSE 100 recovery
I’m also drawn to fund manager Schroders (LSE: SDR), with annual results due on 12 February. Like the banks, 2025 was kind to Schroders’ shareholders. But it’s far from back to its old strengths, with the share price still down around 25% over the past five years.
There’s one benefit from the shares still being a bit depressed — we’re looking at a decent forecast dividend yield of 4.8%. Cover by earnings probably won’t be particularly strong this year. But forecasts suggest earnings should start picking up strongly from 2026, and cover should strengthen nicely along with that.
Schroders’ shares have picked up a bit in the past 12 months, but we’re unlikely to see much in the way of earnings growth when we have those 2025 results. And on the back of that, we should expect a P/E of around 17.
That really does look high enough to me for now. And I think it’s likely to take a full six months to see if 2026 shapes rise as, City brokers suggest. For me, that raises the probability of a volatile share price in the coming months. And I fear it could fall again before any sustainable growth sets in.
But I rate Schroders as a company that’s fundamentally well run. And it’s in a healthy financial position with net cash of around £4bn. It’s a solid long-term consideration, in my book.
