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3 Top Finance Stocks For Your ISA: Barclays PLC, Royal Bank Of Scotland Group plc And Direct Line Insurance Group PLC

Barclays

Even though Barclays (LSE: BARC) (NYSE: BCS.US) did not require state aid during the credit crunch, its financial standing and balance sheet still needed to be improved. As such, its new management team is aiming to slim the bank down even further so as to create a leaner, less risky and more profitable bank in the long run. This is good news for investors, as it sets Barclays up for a more prosperous long term future.

In addition, Barclays should benefit from a growing UK economy. Low interest rates look set to remain in place over the next few years, and this should help to shore up the bank’s balance sheet yet further, with fewer bad loans contributing to an improved bottom line. Certainly, the bank’s move away from investment banking may act as a drag on performance, but much of this slack could be picked up by better than expected performance in the UK retail division. As such, Barclays seems to be a sound buy at the present time.

RBS

The next couple of years are set to be very exciting ones for investors in RBS (LSE: RBS) (NYSE: RBS.US). That’s because the bank is set to increase earnings per share to 29.5p in the current year, which would be an excellent result given its disastrous performance in recent years. And, with RBS currently trading on a forward price to earnings (P/E) ratio of just 11.9, there is considerable scope for an upward rerating over the medium term – especially while the FTSE 100 has a P/E ratio of over 16.

Furthermore, RBS is all set to pay a dividend of 7p per share in 2016. This puts it on a forward yield of 2% which, given the fact that it is still part nationalised, would be an encouraging result. Of course, this looks set to be only the start of a period of strong performance from RBS and, as a result, it could be worth buying now before investor sentiment picks up.

Direct Line

On the one hand, the next couple of years could be somewhat disappointing for Direct Line (LSE: DLG). That’s because the insurance company is expected to deliver no increase in its bottom line during the period, which it could be argued is a reason to avoid investing in it.

However, Direct Line could still deliver an excellent total return during the period. For example, it has a superb yield of 5.3% and, with its shares having a P/E ratio of just 12, it could be subject to a significant upward rerating over the medium term. Furthermore, with the General Election now just six weeks away, Direct Line’s beta of 0.6 could give its investors a less volatile share price experience relative to the wider index.

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Peter Stephens owns shares of Barclays and Royal Bank of Scotland Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.