The Brexit — if you didn’t know any better, you would think that the world was coming to an end when it happened. During the immediate aftermath, The New York Times had this to say. “Britain has voted to leave the European Union, a historic decision sure to reshape the nation’s place in the world, rattle the Continent and rock political establishments throughout the West.”
All that was missing were references to black helicopters and FEMA camps — that at least would have given them some credibility.
Joking aside, Brexit was indeed a financial disaster — but only for a few days. Britain’s benchmark FTSE 100 index quickly recovered the losses, and then some. For 2016, the FTSE gained more than 17%. Not bad for a continental rattling. And those reviled elitist bank stocks were among the biggest winners of Brexit.
To be fair, not all British bank stocks have rebounded as quickly as speculators would have liked. Still, you really have to like this sector. The snarky Brits have a way with words, and Simon Jenkins’ of The Guardian is tops. “Brexit is starting to deliver. British politics was constipated and has now overdosed on laxative. It is experiencing a great evacuation.” Indeed, one of the reasons why Brexit occurred is the same reason why Donald Trump is president of all Americans.
That Britain is reeling in the benefits from Brexit is undeniable. The FTSE is up over 13% since the day before the historic vote.
For bank stocks specifically, Jenkins states that there will be a much more supportive environment. “The Bank of England will pump more money into the economy, or at least into the banks. There will be lower interest rates and a relaxation in reserve ratios. The speculative fever that has fuelled the London property bubble will end.”
Of course, that’s one person’s opinion, no matter how highly esteemed. However, Jenkins’ opinion also aligns with expert consensus. Renowned credit rating agency Moody’s stated that British banks stocks would likely incur a modest impact from Brexit. Furthermore, the challenges are manageable, and Brexit-specific issues won’t materially change the risk assessment of bank stocks.
So much for the mainstream doom and gloom! Here are three British bank stocks to buy now that “Brexeggedon” has as much credibility as the return of Jesus Christ in 1994.
Bank Stocks to Buy After the Brexit: Lloyds Banking Group (LYG)
Straight off the bat, I’m going to say that I bought Lloyds Banking Group PLC (ADR) (NYSE:LYG) during the immediate aftermath of Brexit. In fact, I was looking forward to the referendum vote, and was hoping that Britain would leave the EU. I didn’t have any skin in the game when it came to British politics. I was simply looking for a good deal, and boy, did I get one!
Usually, I try to make eloquent fundamental and technical reasons why to buy a particular stock. For Lloyds, however, I just went with it for a simple reason. We’re talking major British bank stocks, not some speculative junk. Furthermore, we’re talking about Great Britain, which once owned an empire so vast that the sun never set on it. Sure, LYG could go through some turmoil, but I gambled that the long-term picture would be very bullish.
I’m not going to call LYG an outright success, but I’m happy with it. Lloyds was quite a choppy mess for several months. It also had a very big scare in October when shares were approaching their post-Brexit lows. But since then, LYG has been charting an upward trend channel defined by higher highs and higher lows.
A good part of the positive sentiment is that many are finally starting to accept that “nationalism” doesn’t necessarily mean “racism,” “white power,” “Adolf Hitler,” or any number of ridiculous accusations.
As the British like to say, the Brexit doom and gloom was a load of rubbish. But LYG investors like me are still grateful for it.
Bank Stocks to Buy After the Brexit: Barclays (BCS)Barclays PLC (ADR) (NYSE:BCS) is a name that, I have to say, bothers me a wee bit. Back when the Brexit implosion was burning down bank stocks, I happened to be watching CNBC‘s “Fast Money.” The panel was discussing potential trades, and naturally, bank stocks came up. One of the pundits recommended BCS stock. Shares were well off their pre-Brexit high of more than $11, and it was a good deal.
I just happened to think that LYG was a better deal, and so far, I’ve been proven wrong. BCS, among all the other famous British bank stocks, turned out to be a real butt-kicker. As it stands now, BCS is actually more than 5% above its pre-Brexit close. And since reaching a 52-week low of $6.76, BCS stock is up a whopping 63%. If that’s the mainstream’s idea of doom and gloom, give me more!
Even better, the technical charts suggest that there is further upside for BCS and its rival bank stocks.
Aside from choppy weather that resulted in a correction in October, Barclays has been running like a charm. That’s especially true because of Donald Trump. Since winning the election to beat all other elections, BCS has gained 27%. No matter what you think of the politics of Brexit, those are numbers you can’t deny.
Indeed, Brexit may have been the boost BCS was seeking after all this time.
Bank Stocks to Buy After the Brexit: Royal Bank of Scotland (RBS)
Last but certainly not least is Royal Bank of Scotland Group PLC (NYSE:RBS). The Scots know a thing or two about wanting to secede from an unfavorable alliance. More recently in 2014, there was a ballot measure for Scotland as to whether or not it still wanted to be part of the U.K. Ironically, an overwhelming majority of the Scottish electorate wanted to remain under the EU umbrella.
RBS is in quite a messy situation.
Or maybe not. It’s true that RBS is in a state of transition. Among major British bank stocks, RBS has to take care of a number of ongoing liabilities, including regulatory penalties for prior misconduct, and a jettison of jobs and assets. With the latter, though, Japan’s Orix Corporation (ADR) (NYSE:IX) and Germany’s Berenberg Bank are helping bigly. Specifically, these two companies have agreed to buy out a good-sized chunk of RBS’ shipping loans.
RBS has tried a number of times to rid itself of this money loser. Now, it has one less headache to deal with. Even more encouraging, RBS has charted a strong bullish trend channel since the October correction took down British bank stocks. You may not like this trend, but it is your friend!
Even though the politics are a little crazy across the Atlantic, RBS should have a fine time in 2017.
As of this writing, Josh Enomoto was long LYG stock.