I’m not a fan of FTSE 100 banking giants Lloyds, RBS or Barclays right now. It isn’t necessarily down to the self-inflicted problems like risky lending or misconduct like the multibillion pound PPI-misselling scandal. I’m not tempted to buy them because of the strong possibility of heavy Brexit-related profits turbulence stretching many years into the future.
In these uncertain economic and political times it’s worth protecting yourself by investing in shares where, unlike those mentioned above, strong trading conditions in Britain aren’t critical to drive the bottom line.
Taking this theme one step further, a great way to try and make a big cash pile for the years ahead is to buy into banks with significant emerging market exposure, regions where economic growth often powers comfortably ahead of those of so-called developed nations.
Georgia on my mind
Take Bank of Georgia Group (LSE: BGEO), for example. GDP expansion in the country continues to tear away and, according to the national statistics office Geostat today, the economy grew by a stonking 4.8% in 2018. Compare this with the 1.8% rise in the eurozone last year or the sub-1% rise anticipated in Britain for the same period.
Recent trading numbers showed the brilliant sales opportunities that Bank of Georgia enjoys. Revenues jumped 19.4% between July and September, to 266.6m GEL (Georgian Lari), as soaring credit demand also drove the loan book more than a quarter higher year-on-year to 8.72bn GEL. Consequently pre-tax profit before exceptional items soared 15.7% to 117.1m GEL.
Unsurprisingly, then, City analysts are expecting earnings to boom 19% in 2019, and this underpins hopes of a bulky 90p per share dividend. A consequent 5.7% yield gives plenty of reason for income investors to take a look, while the bank’s low forward P/E rating of 4.9 times should tempt value hunters to grab a slice of the action too.
Now Banco Santander (LSE: BNC), like Lloyds et al, isn’t immune to the economic troubles that Brexit is bringing, the business generating 13% of underlying attributable profit from these shores. Adding further trouble to the pot, the decelerating eurozone economy threatens profits growth at the Spanish bank, too, because more than half of group profit is generated in Europe.
That said, I’m impressed by Santander’s resilience in recent times despite worsening economic conditions on the continent and am confident that it has the tools to keep thriving. In recent days it advised that attributable profit leapt 18% year-on-year in 2018 to €7.81bn, with growth speeding up to 34% in the final quarter to €2.07bn.
It’s this ability to thrive in a tough environment that encourages City brokers to predict a 9% earnings uplift in 2019, optimism that translates into predictions of a chubby 23 euro cent dividend. Consequently the firm sports a market-beating 5.6% yields.
At current prices Santander is a steal, in my opinion, the bank dealing on a prospective P/E multiple of 7.9 times. This is also particularly cheap when you consider its exceptional revenues outlook in Brazil, from where it generates 26% of total profits, as well as the rest of Latin America’s major other emerging economies like Mexico and Chile.
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Royston Wild 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.