It has been a long journeyback to respectability for the big banks since the financial crisis, and the truth is they havent made it safelyhomeyet. Investors who hopped on for the ride may be out of patience following the latestdelays, diversions and break-downs. Is now the time to hop off?
Barclays (LSE: BARC) was supposed to be bombing alongopen road by now but remains lost in the woods, with its share price down nearly 40% in the last year, and 11% in the last month. Its2015results werea carcrash, with that headline 374m loss and 50% reduction in dividend payments.
Barclays is yet another bank undergoing a strategic overhaul and pulling out of non-core markets, in the hope of sweatingthe rest of the business. Talk of selling the62% stake in its profitable Africa business has disappointed some, but will please investors (like me) who have long complained about the complexity of bank balance sheets, which makes judging them a near-impossible task.
Once chief executive Jes Staleys strategy is complete, Barclays should be a much cleaner and clearer operation, having been split into two high-quality financial services divisions, and (hopefully)drained of its toxic legacy at last. The journey wont be complete until 2019, and further delays cant be ruled out. Recent slippagecould be a buying opportunity, if you enjoylife in the slow lane.
HSBC Holds On
HSBC Holdings (LSE: HSBA) has also had a tough year with the share price down 22% and its recent full-year results did little to help despite a 1% jump in profits before tax to just shy of $18.9bn. This was largely boostedby favourable one-off items while underlying profits actually fellby 7% to $20.4bn. Still, at least HSBC hiked itsdividend, lifting the full-year payout to 51 cents, marginally up on50 cents in 2014.
HSBC suffered a second-blowwhen broker Bernstein damnedthe results as quite dreadful and cut itsprice target from 550p to 380p, significantly below todays 453p. It saidfalling credit demand, lowerinterest rates and a sharp drop in corporate activity willonly make the goingharder, and warned thedividend could be cut in the next six months. Given that HSBCcurrently yields 7.21%, this could hardly come as a surprise.
Like Barclays, HSBC hasto undertake the hard work ofring fencing its UK banking operations while building its reputation as the go-tobank in China lets hope that prize stillglitters as China slows. Management claimsHSBC is better balanced than a year ago, but it still hasnt fully found its bearings.
Low Road To Scotland
Many investors, including me, gave up on Royal Bank of Scotland Group (LSE: RBS) several years ago, as the stock repeatedly stalled. It is now down 40% over the last year and 10% in the last month after posting a set of results that made HSBCs look quite good by comparison.
With a 2015 loss of 2bn, endless litigation and no dividend in sight, only extremely long-sighted investors will want to tag along for what will be a slow and bumpy ride. Either that, or existing investorswho are reluctant to accept they took a wrong turn some way back. One day, RBSshould get there, but it can take that trip without me.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and 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.