A major reason to buy a slice of HSBC (LSE: HSBA) (NYSE: HSBC.US) is its regional diversity. Certainly, it is a major player in the UK banking scene and is benefitting from an upturn in the performance of the UK economy, but compared to a number of its FTSE 100 listed peers, HSBC has a wider regional spread and, in the long run, this should enable it to tap into faster growth rates across the developed and developing world. In addition, it also allows HSBC to offer greater stability than many of its peers, with challenges in one region…
A major reason to buy a slice of HSBC (LSE: HSBA) (NYSE: HSBC.US) is its regional diversity. Certainly, it is a major player in the UK banking scene and is benefitting from an upturn in the performance of the UK economy, but compared to a number of its FTSE 100 listed peers, HSBC has a wider regional spread and, in the long run, this should enable it to tap into faster growth rates across the developed and developing world. In addition, it also allows HSBC to offer greater stability than many of its peers, with challenges in one region having the potential to be offset by strong performance in another.
Furthermore, HSBC also offers excellent growth prospects over the next two years. For example, it is expected to increase its bottom line by 25% in the current year, and by a further 6% next year. That’s a superb rate of growth when you consider that HSBC has remained profitable throughout the credit crunch and, looking ahead, it could cause investor sentiment to dramatically improve.
Shares in newly listed bank, Aldermore (LSE: ALD), have made a strong start since their IPO in March, being up 13% versus 3% for the FTSE 100. And, today’s first quarter update shows that the business is making encouraging progress, too, with Aldermore on target to meet its £1.4bn net new lending target for the year, with capital ratios and customer deposits improving in the most recent quarter.
Looking ahead, Aldermore is expected to post excellent bottom line growth. For example, in the current year its earnings are all set to rise by 57%, followed by growth of 27% next year. And, with it trading on a price to earnings (P/E) ratio of just 11.7, Aldermore has a price to earnings growth (PEG) ratio of just 0.3. This indicates that its shares offer superb value for money and appear to be worth buying right now.
Although the pay of its senior management has dominated headlines in recent weeks, RSA (LSE: RSA) is making excellent progress in its turnaround plan. Certainly, last year’s loss was a setback, but RSA is forecast to return to profitability this year, with pretax profit expected to come in at £444m in the current year, which is only fractionally behind 2012’s figure of £448m.
Back then, RSA was paying out around 83% of profit as a dividend and, while that level of payout is unlikely to be reached again even in the long run as the company seeks to reinvest in its own growth potential, this year’s expected payout ratio of 43% seems rather low. As such, RSA’s dividend yield is likely to rise from its current 3.2% level, while its shares also have capital gain potential due to their P/E ratio of just 13.8.
Today’s update from Old Mutual (LSE: OML) has beaten market expectations, with the financial services company seeing its sales rise by 18% in the first quarter of the year to £7.3bn, with the key reasons being acquisitions, market share gains and inflows of new capital. Despite this, though, the company’s shares have risen by just 0.4% today, but are still up 20% since the turn of the year.
Looking ahead, Old Mutual is likely to suffer from having a relatively large exposure to South Africa, with the country experiencing relatively weak economic growth at the present time. Still, its bottom line is expected to rise at a double-digit rate in each of the next two years which, when combined with a P/E ratio of 11.5, indicates that now could be a good time to buy its shares – especially when the FTSE 100 trades on a P/E ratio of 16.
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Peter Stephens owns shares of HSBC Holdings, Old Mutual, and RSA Insurance Group. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.