Why This Fund Manager Is Backing Barclays PLC (ADR) (BCS), Lloyds Banking Group PLC (ADR) (LYG), and Royal Bank of Scotland Group plc (ADR) (RBS)

Lloyds Banking Group PLC (ADR) (NYSE:LYG)
Lloyds Banking Group PLC (ADR) (NYSE:LYG) has put in a better share price performance than Barclays PLC (ADR) (NYSE:BCS) and RBS 2013. In the last month alone, the shares are up 21.1%. A large amount of this rise was inspired by the bank’s recent Q1 results. Lloyds Banking Group PLC (ADR) (NYSE:LYG) reported a big fall in impairments, no further PPI compensation provision and a profit before tax of more than £2bn.

On Lloyds Banking Group PLC (ADR) (NYSE:LYG), Mr Moore says: “Of the three, Lloyds is running down its non-core book fastest. As the bank has demonstrated a return on equity greater than its cost of capital, the discount to book value has closed.”

Royal Bank of Scotland Group plc (ADR) (LSE:RBS)
For my money, Royal Bank of Scotland Group plc (ADR) (LSE:RBS) has the greatest upside potential from here. The bank currently trades at a discount to net tangible asset value of more than 50%. If management can prove a turnaround, the possible gains are huge. If Royal Bank of Scotland Group plc (ADR) (LSE:RBS) can return to paying a dividend, this should then inspire further rises.

“Royal Bank of Scotland Group plc (ADR) (LSE:RBS) has become a much more focused bank” says Moore. “Any future dividend payment would force a rerating according to that yield. The shares would then be treated by the market just like any normal company.”

Words of caution
Investing in these banks is not without risk. As Moore says, “they are among the most highly geared companies on the markets today. The future of the UK’s banks is inextricably linked with the wider economy.”

The article Why This Fund Manager Is Backing Barclays, Lloyds Banking, and Royal Bank of Scotland originally appeared on Fool.com.

David owns shares in Barclays, Lloyds Banking Group and Royal Bank of Scotland. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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