Being an investor in banks such as Barclays (LSE: BARC) (NYSE: BCS.US) and Standard Chartered (LSE: STAN) has been a tough existence during recent months. Indeed, with various allegations of wrongdoing clouding the sector and weakening investor sentiment, it is little wonder that the share price of Barclays and Standard Chartered are in the red to the tune of 15% and 18% respectively since the turn of the year.
However, this could prove to be a great time to buy both banks. Not only are they cheap, they have great prospects and, moreover, a combination of the two of them could prove to be a winning play in Foolish portfolios. Here’s why.
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Huge Potential
Despite the aforementioned allegations of wrongdoing that have been present in recent months for both banks, they continue to have hugely positive futures. For example, Barclays is expected to grow its bottom line by 26% in the current year and by a further 29% next year, while Standard Chartered’s earnings are set to be 4% higher this year and increase by another 10% next year.
This shows that, while they have both experienced challenging periods, the two banks remain strong growth plays that seem to have very bright futures.
Geographic Exposure
Where the two banks could marry well in Foolish portfolios is in terms of their geographic exposures. While Barclays is a UK-focused bank with operations abroad, Standard Chartered is very much aligned to Asia and, as a result, owning the two banks could provide not only diversity, but access to two of the fastest growing regions in the world at present.
Indeed, the UK and Asian economies continue to perform relatively well. The UK economy is the fastest growing developed economy in the world and, as a result, demand for new loans is high and the write downs of old loans is reducing all the time. This is great news for Barclays’ bottom line and could even mean that its hugely appealing growth potential increases somewhat.
Meanwhile, the Chinese economy in particular holds great promise for banks such as Standard Chartered. As a well-established presence in that market, it is well placed to take advantage of a shift towards a consumer-led economy that will require more loans to businesses and individuals. Just as mining companies benefited from demand for steel during a period of capital expenditure-led growth, banks such as Standard Chartered could become beneficiaries of increased demand for loans moving forward.
Looking Ahead
Despite their stunning future prospects, neither Barclays nor Standard Chartered trade at premium valuations. For example, Barclays has a price to earnings growth (PEG) ratio of just 0.4, while Standard Chartered’s PEG is also attractive at 0.9.
As a result of them offering strong growth at reasonable prices, as well as their diversified regional exposure, Barclays and Standard Chartered could prove to be the perfect banking partnership.
