HSBC offers a better investment opportunity to rival bankLloyds, says Allianz Global Investors' UK equities fund manager SimonGergel, who adds that the British government's placing of shares in Lloyds isnot in itself a reason to buy Lloyds' stock.
"The government's placing is no reason to buy the stock - it does not changethe fundamental picture - we don't see much value there. They already trade ata significant premium to book value and have only modest growth prospects,compared to, say, HSBC which looks cheaper and has better structural growthopportunities," says Gergel.
Lloyds shares are down by 4.8 percent after the government sells 4.2 billionpounds ($6.93 billion) worth of shares in the bank to cut its stake to under 25percent and put the government on track for a complete exit in the next year.
HSBC's shares are up by 0.3 percent, while the benchmark FTSE 100 index rises 0.4 percent.
"Lloyds looks fully valued on 1.7 times tangible book value, compared toHSBC which trades at 1.3 times tangible book value and has greater exposure togrowth regions of the world, such as Asia," says Gergel.
"The growth prospects for Lloyds in the UK are limited as the economy ismature and we believe that low interest rates and high levels of consumer andgovernment debt will restrain economic growth and the demand for furthercredit," he adds.
($1 = 0.6059 British Pounds)
Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net
Lloyds (LLOY)
HSBC Holdings (HSBA)
