Barclays (LSE: BARC) (NYSE: BCS.US) didnt really need the recent correction for its share price to look wobbly. It has been doing well enough on that front, without any outside assistance. But every little helps.
Barclays is down 18% over the past 12 months, while the FTSE 100 has fallen just 5%. Clearly, its wounds have largely been self-inflicted.
At todays price of 223p, Barclays is now almost 25% off its 52-week high. For me, its been a screaming buy for months, but only ifyou recognise what the UK banking sector is turning into.
Really Useful Bank
The years of death and glory are over. Barclays will no longer be strutting proudly on the world stage. This years shareholder revolt over banker bonuses effectively put a stop to its global ambitions. Politically, casino investment banking is just too poisonous.
Brokers Brewin Dolphin reckon the same. In fact, itthinks the big banks are starting to look like utilities, and should appeal to investors looking for steady growth and consistent returns on capital.
The banks are also bound by ever-tightening regulation, rather like the utilities. But at least this should keep them on the straight and narrow.
Forecast of Fun
That might detersome investors, but others will welcome the opportunity to lock into a steady, progressive yield at todays lower share price.
Barclays yield isnt what it was. It is on a forecast yield of just 3.1% for December, some way below the current FTSE 100 average of 3.6%, but that wont last.
With management planning further steps to restore the dividend, the yield is forecast to hit 4.5% by December 2015.
Please Forgive Me
That isnt the only number heading in the right direction. Barclays earnings per share are forecast to rise 23% this calendar year, and 31% next year, which is pretty juicy for a wannabe utility.
The bank still has a long way to go to repairthe reputational damage of recent years. It also has to cope with the rise of the challenger banks (although I question whether the new boys will achievemanagethe economies of scale to really challenge the big boys).
Some of you will want to avoid the banking sector altogether and I understand why. The bumpy ride is set to continue for a while yet.
But if you reckon its time to forgive and forget, Barclays forecast valuation of 10.9 times earnings for December doesnt look too demanding at all.
The new low-risk Barclays could prove a great buy and hold for long-term investors. In fact, it’s the type of stock you might want to pop into your retirement portfolio.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.