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Interest income is the vast majority of LBG earnings and one of the main reasons of owning it. It is part of the culture and a key KPI. During my five years there any attempt to build fee income met enormous practical and cultural resistance, especially as it is associated with more competent and expensive staff and investment in products and services. They worry about lending and costs which is fine but I would not attach too much credibility to a statement of increasing fee income.
While the balance sheet is massive the underlying units are not that big. BUT it is really only set up for retail banking including mortgages. Having worked there I agree they never found any synergies between the commercial bank, retail bank, insurance and Private Bank. It is all operating in splendid isolation and while there was some pressure to "collaborate" the focus was exclusively on top line mixed up with wokeism. Management and culture is largely awful. Perhaps it is better to focus on retail managing that big cash generating balance sheet and digitising and focus on playing large secure dividends like many years ago. I really see no long term value in Commercial Banking, Private Banking or Insurance for Lloyds. So I guess I largely agree...
Many thanks Robe141!
Lloyds Bank is a virtual oligopoly on the retail side in the UK. Which is reflected in their strategy (stagnant), staff(incompetent) and culture(lazy and woke) as well as very expensive offering as per present deposit rates.
I agree a takeover is virtually impossible but it is exactly what is needed to bring a more competitive offering to the market.
Almost all of our problems at the moment is due to insane Russian & China sponsored "climate" policies in the US, UK and in the EU, especially Germany. The second problem is Government spending across the same jurisdictions. Only by creating a strategy of energy independence will inflation be tamed and security return and only by cutting budget deficits and borrowings will sound economic conditions return.
The UK has not yet taken advantage of the liberation from the EU by cutting regulation and taxes. In a world where the EU and the US are still expanding red tape and big government, the UK has a massive opportunity to create Singapore on the Thames. It has the laws, the language and the financial markets to be able to expand free market capitalism to create wealth and prosperity for the British people. Big Bang 2.0!
88,
I don t disagree. Chase/JP can also sell/streamline the friendly but useless LBG Private Bank and sell off the LBG Commercial Bank. Since Andrew Bester quit as CEO of the Commercial Bank they have just strangled it and never built increased market share with SME and mid Market companies. It can be sold to Santander, HSBC, or Barclays. The only problem for Chase is that they cannot expand LBG's retail bank due to market share ceiling, BUT they can maximise the balance sheet while keeping the three brands; Lloyds, BoS and Halifax while considering a European strategy for Lloyds.
Very unlikely to happen though...
Walker, I could not agree more. AHO's last 5 years was a complete waste of time and the new dude is not making any progress. Historically the company has been committed to paying out "excess cash" but with a combination of regulatory interference and new management this is no longer true. I worked at LBG as an MD for about five years and the idea of shareholder value was not something the board focused on. Even if they had a credible growth strategy the management and the culture prevents effective implementation. I think it is a matter of bailing out at hopefully decent levels to move capital to greener pastures.
Many thanks!
Many thanks Will! Helpful for us foreign investors. Cheers,
I agree. While the digitisation of the retail bank must be regarded as very successful the consequent attempts to digitise other parts of the bank such as private banking and the commercial bank has not. As someone who was there for 5 years and has previous experience in digitising complex investment banking products, the model they had was ineffective. Digitisation of Investment Banking and Commercial Banking products are best done "in the business". LBG however followed they retail model with a highly centralised model meaning the money was spent by people who neither knew the products or the clients...
I don 't have a strong view on yesterdays announcement. BUT I found Vin Maru to be highly competent and thoughtful. I did deal with him directly don several projects. David Oldfield however was a terrible leader. He took over the Commercial bank from Andrew Bester who was a fantastic banker and a great leader. He really transformed the commcerial Bank a drove up returns very successfully. That all fell apart when Oldfield took over. Oldfield never met a client or staff and only focused on costs and top line. In my view LBG should sell the Commercial Bank and integrate SME Banking with Retail with product supply from a Global Investment Bank. They never get proper market share in Mid Markets and have no products to deal with Global Corporations. Their Institutional business is all GBP clearing... LBG is a balance sheet business and as such it can generate massive cash. Cash that is best returned to shareholders.
Thanks very much!
Livestock,
I worked at Lloyds at the said Brexit and PPI events... Just the memoryy of it all makes my stomach turn... The Brexit was a particular scandal as the Chairman was a Brexiteer and AHO was not. AHO's own Economist team produced a secret report about how bad Brexit would be for LBG. The report leaked (but we were not allowed to speak to clients about it...) and the conflict of interest between LBG and the Chairman's position caused dismay with staff. The rest is history... Investment banks seems unison on 63-64 price target. Hopefully the buyback will support EPS.
Thanks for summary! Surely faster than planned, but one can argue the price has become more attractive at these levels. Who knows...
Who knows? I am taking the opportunity to top up most of UK & Europe holdings up to my own (unscientific) benchmark. Financials are grim today but I suspect people are raising cash from mutual funds, etf's etc. which ebbs the market.
Problem is lack of strong competent leadership in the West held up by "climate-nazis" preferring to buy cr*p energy products from dictatorships rather than harvesting plentiful energy supplies from under our own feet in Europe, UK and the US. Michel Shellenberger has it right on his substack.
Damo, many thanks for your perspectives! I especially appreciate your UK/US assessment as I have been wondering why the trading characteristics were so different. Clearly the lack of liquidity in the UK has been worrying me, especially at execution, but I have grown more comfortable as time went on. In the 9ish months I have been building these portfolios I have found myself gyrating towards the UK. Because of the US characteristics (portfolio under water since exception) I have become more cautious. I am also worried about the USD... Also I appreciate your discussion about the "single owner" UK shares and I had suspected that it was driven by tax however I did not really have a view about the pro/cons of this situation. I will run my initial portfolio with minimal changes this year and try to set up a better system for monitoring the portfolio. I find this web service quite helpful but struggle to get the same type of info from the US...
Many thanks & Good Luck!
Thanks Livestock!
Damo, a wealth of info! Many thanks! I will digest the next few days and revert. Cheers,
Hi Damo, I just noticed this post. Actually looking at my spreadsheet I technically have 5 investments in this sphere which will be 10% of "AUM" ... Since I only built this portfolio during last summer and autumn I don't have much knowledge of its long term performance. To date the EUR investments are flat before dividends, the one Sterling is up 0.9pct before div but the two USD funds are down 15% and 5 pct respectively. The last two are down 10 and 3 pct after dividends... My intention is to add to this portfolio but will defiantly wait until I am more experienced in monitoring it. My focus at the moment is building a REIT portfolio across the UK and US. I run no leverage on my end (yet). Cheeers
Damo, many thanks for this! It appears that this board is vastly more informative and serious than boards of widely held shares. I am running 8% in this sphere across four investments in EUR, GBP & USD. I only put these on last summer and am still learning how to monitor/follow them so I am unlikely to change this the next few months. Good luck!
This is what he wrote:
"2021 has been a year of solid financial performance with successful strategic execution, ongoing investment and continued franchise growth. This has enabled the Group to deliver on its customer focused ambitions, as set out in Strategic Review 2021, as well as on Helping Britain Recover during the pandemic. It has also enabled the Group to offer high levels of capital return to our shareholders.
Building on our strong foundations, our purpose of Helping Britain Prosper forms the basis of our new strategy to profitably deliver for all of our stakeholders. We will look to deepen relationships with our existing customers, both consumers and businesses of all sizes, and meet more of their financial needs by making our great products more relevant to them and our channels simpler and more personalised to use. This will set the Group on a higher growth trajectory with more diversified revenue streams, while we retain our strong focus on cost and capital discipline. Enabled by maximising the potential of our dedicated people, technology and data capabilities, our strategy represents an exciting new chapter for Lloyds Banking Group.
I am confident that the Group's purpose, customer focus, unique business model and significant competitive strengths, embodied in our ambitious strategy will ensure the Group is able to deliver higher, more sustainable long-term returns and capital generation for our shareholders, whilst meeting the needs of broader stakeholders."
Each paragraph is fine but they do not belong together. It is typical Lloyds Bank powerpoint word sallad with no actual real life relevance in terms of the "WHATS", "WHENS" or even the "HOWS". .
I was hopeful but Nunn's first chance to bring a new expansive strategy growth has been lost. The conclusion is that as soon as you see another bloody ex. McKinsey consultant as CEO run for the hills (check Citigroup). When I worked at LBG ( a top 1% position) a tiny part of my total compensation was tied to the share price (less than 5%). We need a shareholder revolution as the franchise that LBG sits on is incredibly valuable but the past and present top levels of management are not able to translate this to value for shareholders, only for themselves.
Just look at what AHO did at CS before he was kicked out. It was ONLY about himself and not about the company or the shareholders. Today LBG is down, as usual, much more than peers. Why? the answer is above.