Lloyds Banking Group (LSE: LLOY) is without doubt one of the UK’s most generally held shares. That’s partly as a result of 65,000 individuals work for the group, a lot of whom personal firm shares. What’s extra, Lloyds could be very in style with UK retail traders, with a whole bunch of hundreds showing on its shareholder register. Thus, the Lloyds share worth is keenly watched, so right here’s what occurred to it in 2021.
The Lloyds share worth in 2021: highs and lows
As I write on Thursday afternoon, the Lloyds share worth stands at 48.43p, up 0.43p (+0.9%) on Wednesday’s shut. On 31 December 2020, the inventory closed at 36.44p, so it has added virtually 12p this calendar yr. That’s a wholesome enhance of just about a 3rd (+32.9%) in 2021. This simply beats the FTSE 100 index’s acquire of 15% since 31 December 2020.
Nevertheless, the Lloyds share worth has been considerably greater — and far decrease — this yr. Final month, it hit an intra-day 52-week excessive of 51.58p on 2 November. It has since fallen again by 3.15p (-6.1%). Then once more, Lloyds inventory had a weak begin to the yr, hitting its 2021 intra-day low of 32.25p on 28 January. It has since soared by 19.33p from this backside, surging by 60%. Fortunately, this vindicated my repeated arguments that it was an ideal restoration play for 2021.
Is Lloyds nonetheless a price play?
On the present Lloyds share worth of 48.43p, the Black Horse banking large is valued at £34.4bn. To me, this appears a modest price ticket for a number one UK lender with 30m prospects and market-leading positions and types. However UK banking has been a tough and troubled enterprise for the reason that international monetary disaster of 2007-09. In consequence, British financial institution shares commerce on modest rankings right this moment.
At current, Lloyds shares commerce on a price-to-earnings ratio under 7.4 and an earnings yield of 13.6%. These figures undoubtedly enchantment to me as a veteran worth investor. However the UK regulator ordered banks to droop their money dividends in 2020 — and after they returned, they had been rebased at decrease ranges. Therefore, the Lloyds dividend yield (beforehand one of many FTSE 100’s highest) is slightly below 2.6% a yr. That’s a way under the broader FTSE 100’s yield of roughly 4%. Nonetheless, these figures recommend to me that Lloyds shares stay firmly in worth, unloved or missed territory.
Constructive and negatives for Lloyds
Once I stay up for 2022-23, I see two negatives and two positives for Lloyds and its share worth. First, the financial institution’s income had been vastly boosted this yr by loss write-backs, as precise mortgage losses proved to be significantly decrease than forecast. These features are unlikely to persist subsequent yr, taking a piece out of bottom-line progress. Second, Covid-19 is but to be overwhelmed, so additional new variants would possibly hit UK financial progress and Lloyds’ earnings subsequent yr.
Now for the positives. First, the Financial institution of England this month raised its base charge from 0.1% a yr to 0.25%. This, the primary charge rise for 3 years, will likely be adopted by others in 2022 because the Financial institution seeks to curb rising inflation. Increased charges ought to result in greater web curiosity margins (NIMs) for UK banks. Second, if Lloyds makes use of its billions of kilos of spare capital to maintain lifting its dividend, then this might assist the inventory going but greater.
In abstract, I don’t personal Lloyds shares, however I might purchase right this moment, whereas hoping for a sustained financial increase in 2022!
Cliffdarcy has no place in any of the shares talked about. The Motley Idiot UK has really helpful Lloyds Banking Group. Views expressed on the businesses talked about on this article are these of the author and due to this fact might differ from the official suggestions we make in our subscription providers, similar to Share Advisor, Hidden Winners and Professional. Right here at The Motley Idiot, we imagine that contemplating a various vary of insights makes us higher traders.