UK banks have “front-end loaded” bad debt charges making for a potentially very strong bounce this year
Barclays PLC (LON:BARC) and NatWest Group PLC (LON:NWG) offer the best value among the European banking sector, suggests Berenberg.
The broker has ‘buy’ recommendations on both Barclays, with a price target of 180p, and NatWest (200p pt) following their recent results.
Bad debts dominated the recent reporting season, but by and large, outcomes here have been better than expected, Berenberg said.
Strong balance sheets among the UK banks have also enabled them to “front-end load” bad debt charges, it says, making for a potentially very strong profits rebound this year.
“Recent developments related to Brexit and vaccinations provide further support and, in our view, can enable loan losses to normalise faster than consensus.”
UK banks have also benefited from strong mortgage growth and pricing, while the Bank of England has swerved negative interest rates thus far.
NatWest Group pays 3p divi with UBS confident there is scope for bigger payouts
Barclays resumes dividends but bad debts dent profits
In addition, Britain’s banks have been allowed to resume dividends and near-term yields should be attractive to investors, Berenberg added.
Today, Barclays was trading at 159.7p and Natwest 183.75p.
Read More: Barclays PLC and NatWest Group PLC set for profit rebound in 2021, suggests