Barclays also provides international diversification and a hedge against the falling dollar, which is now at a 14 year low against the pound sterling. Barclays has business operations in 37 countries outside the United Kingdom and a strong presence in Africa through acquisitions. There is speculation that Barclays itself might get acquired by Bank of America (BAC). Bank of America currently holds 9.2% of U.S deposits and has been attempting to expand without breaching the 10% regulatory ceiling.
So why would I want to invest in Barclays instead of Bank of America or Citigroup (C)? Apart from international diversification, the dollar hedge and the ETF growth theory, Barclays also sports better revenue and earnings growth than either Bank of America or Citigroup. It is astounding to see a company with a market cap of almost $88 billion exhibit quarterly revenue growth of 35% and earnings growth of 45.1%. Barclays does not face the mortgage default and weak housing risks that Bank of America is facing as the British housing and mortgage industries are very strong right now. But that could change overnight.
The stock has a decent dividend yield of 3.8% and an attractive valuation with a current P/E of 12.57 and a forward P/E of 9.94. Barclays may prove to be a better and possibly safer alternative to either State Street (STT) or WisdomTree as a play on the burgeoning growth in ETFs.
* Barclays is a globally diversified bank with strong revenue and earnings growth.
* Barclays through its iShares family of ETFs is the 800 pound gorilla amongst ETF providers.
* Barclays sports an attractive valuation with a forward P/E of just 9.94 and P/S of 2.28.
* Barclays profit margin of 18.34% is well below the margins of either Citigroup or Bank of America.
* Barclays could be hit by a slowdown in the British housing market.
* The dollar may rebound from its low, leading to a drop in the price of Barclays ADR shares.
BCS 1-yr chart