3 Undervalued UK Bank Stocks

Star fund manager Neil Woodford has dipped his toe back into the banking sector, so should you be considering these undervalued financial stocks?

Emma Wall 20 May, 2014 | 4:10PM
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Star income manager Neil Woodford has bought a bank for the first time in 10 years. After dodging the banking bullet during the 2008 crisis, Woodford has now bought HSBC (HSBA) on behalf of the portfolio he runs for adviser St James Place.

Woodford said he believed HSBC was undervalued, but warned the banking sector – including HSBC – still had a long way to go before the scandals were forgotten. Woodford Investment Management will launch its inaugural income fund next month.

According to Morningstar equity analysts, among the most undervalued stocks in the UK are three banking stocks – all with a four star rating, revealed below.

Barclays (BARC)

Barclays is one of the largest banks in the United Kingdom and has operations around the world. Its businesses include U.K. banking, which serves retail and business customers in the United Kingdom; Barclays Capital, a debt-focused investment bank; international banking, which serves retail and business customers in Europe, Africa, and Asia; and Barclaycard, a large credit card issuer.

Lloyds (LLOY)

London-based Lloyds Banking Group is a financial services firm that operates primarily in the U.K. through its retail bank, insurance group, and wholesale and international banking unit. Lloyds more than doubled in size when it acquired rival HBOS, and now controls 20% of the U.K. mortgage market and 30% of its savings market (about 25% after planned disposals).

Standard Chartered (STAN)

Standard Chartered has its headquarters in the United Kingdom but operates almost exclusively in Asia, Africa, and the Middle East. Its biggest markets are India and Hong Kong, which combine to produce about 31% of the group's operating profits in 2013; Korea and other Asia Pacific (27%), the Middle East (12%), Singapore (11%), Africa (9%), and the rest of the world (10%) round out its portfolio. Its wholesale banking operations dominate, commanding about 75% of risk-weighted assets.

These undervalued stocks were screened using Morningstar Select

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Barclays PLC222.45 GBX-0.07Rating
HSBC Holdings PLC671.10 GBX0.25Rating
Lloyds Banking Group PLC59.10 GBX-0.07Rating
Standard Chartered PLC723.40 GBX0.56Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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