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The Banks’ Real Results: Barclays PLC (ADR) (BCS), Royal Bank of Scotland Group plc (ADR) (RBS)

RBS is harassed by politicians with agendas, but that could yet turn to its advantage, with the Coalition eager for demonstrable progress before the next election in 2015. CEO Stephen Hester is making positive noises about privatization.

A partial flotation of the U.S. Citizen’s Bank could prove a valuation boost this year. Trading at 0.7 times TNAV, RBS has more headroom for rerating.

Barclays PLC (ADR) (NYSE:BCS)
Barclays’ results were accompanied by details of its new strategy, and greeted by a near-10% jump in the shares.

The bank will focus on the U.K., U.S., and Africa, and is cutting jobs in investment banking, Europe, and Asia. The sole closure is that of the toxic tax-structuring unit. It will invest in high-return businesses such as U.K. mortgages, its Wealth business, and Barclaycard — an often-overlooked gem.

It’s also committed to accelerate its dividend from next year, targeting a 30% payout. Trading at 0.8 times tangible NAV, Barclays may be undervalued.

There’s a reasonable growth story behind all the banks, and they have put most of their self-inflicted risks behind them: the wild speculations in derivatives and over-exuberant lending, and the rule-breaking that came back to bite.

But they’re more vulnerable than most companies to a blow-up in the eurozone, the risk that markets forget when they’re bullish and panic over when they’re bearish.

The article The Banks’ Real Results originally appeared on and is written by Tony Reading.

Tony does not own any shares mentioned in this article.

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