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Why I’m More Bullish Than Ever On Barclays PLC

Sometimes, certain problems are nice to have.

Certainly, they are still problems and challenge the individual(s) whom they concern. However, while many problems are brought about because of things turning out worse than expected, some problems can surface because things prove to be better than expected.

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Indeed, this is the situation that the (relatively) new Bank of England Governor, Mark Carney, finds himself in. His key idea to provide forward guidance on interest rates sounded very plausible to many investors when the conditions he placed with regard to interest rates being raised seemed a long way off.

However, with the UK unemployment rate falling to 7.7% recently, Mark Carney is faced with questions from investors, politicians and anyone else as to when, in fact, he and the MPC committee will choose to raise rates. In other words, good data is giving Dr Carney a nice problem to have, albeit a problem nonetheless.

As a keen investor in bank shares, such a problem is most welcome, for it highlights the fact that the UK economy is continuing to make encouraging progress in 2013 after a number of poor years.

As such, I’m feeling more bullish than ever for UK banking prospects and particularly the outlook for Barclays (LSE: BARC) (NYSE: BCS.US).

As well as benefitting from a UK economic recovery, Barclays offers private investors like me excellent growth prospects. Indeed, earnings per share are forecast to grow by 22% in 2014, which is very impressive indeed.

Furthermore, shares are expected to offer an above-average yield in 2014, with a prospective dividend yield of 4% beating the FTSE 100 average of 3.5%.

In addition, shares currently trade on a forward price-to-earnings (P/E) ratio of just 8, which is well below the FTSE 100 and the wider banking sector. They have P/Es of 15 and 16.5, showing that Barclays offers good value on a relative basis.

Indeed, combining the P/E ratio and growth rate to give the price to earnings growth (PEG) ratio further highlights the good value offered by Barclays’ shares, with the PEG ratio being well under the key level of 1.0.

So, a combination of improving prospects for the UK economy, an exciting growth rate, good value for money and an above-average prospective yield mean that I’m bullish about Barclays.

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> Peter owns shares in Barclays. 

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