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Don't know if it is of any significance but the SE charts on trading volume show the LBG volume on Friday at 292.4m - the highest trading volume since 18 June. Volumes have been very low (in a comparative sense) for the last few months. Maybe the experts have an explanation apart from the obvious that all the big fund managers are on holiday? The SP certainly seems to drift downwards on low volumes. Sell in May and go away seems to be born out.
Not much good news around at the moment and the banking sector is taking a hit although trading volumes are low so a relatively low level of sellers can have disproportionately negative effect. I don't subscribe to the doom and gloom, I suspect we will be a better position in a few months. The fascinating thing about LBG is that if you add up the cumulative capital cost of PPI, Brexit market disruption, and Covid then I think you would come to a figure close to £35bn and that's probably conservative. Around 50p per share and say 35p post tax. So if those events hadn't happened LBG would have been able to pay an additional 5p divi per year for the last seven years. What price the shares then? My point is that going forward I hope we can avoid a repeat of these horrible head winds. The current profitability is good, risk management strong and net interest margin holding up well. So with a fair wind maybe we can see some really strong divi flows round the corner and then IMHO the share price will take care of itself.
I agree Badgernator on the thrust of your comment but I am not persuaded it is an "easy" task to raise the SP. What LBG need more than anything is a period of relatively calm sailing, good margins and healthy divis. As we all know, the last decade has been a nightmare for the banks - the financial crisis, the self inflicted disaster of PPI (cost to LBG £27bn or five years + after tax profits), the drawn-out political upheaval of Brexit and damage to international confidence and, just when things were looking up, a COVID pandemic. You can reasonably imagine/expect one of those disasters occurring every decade but four in neat succession? Most companies hit with a £27bn cash liability would fold - its a tribute to the robustness of the business that it is still here and making money. Of course, it's way undervalued and scarred but the events of the decade, but if we just get some calm water and a strong flow of divis that will be corrected and IMHO much quicker than most analysts predict.
67Sam - thanks for an excellent article from the FT. The convergence of value and momentum could be very interesting for financial stocks and especially LBG. In my view the quality of the Lloyds earnings is consistently under-rated by the market. The LTV ratio on the mortgage book speaks for itself.
Agree entirely this is a slow burn in the right direction. Up 63% since its 15 Oct low - if it repeats that performance we could be looking at mid to late 60's by October. The UK economic forecasts are mostly positive and business confidence at a record high. Just keep the vaccines pace up and the opening up of the economy and LBG should be looking good.
Interesting piece in the Times today. Equity funds swelling with new money and the target investments include value stocks such as airlines, banks and energy companies that have been unloved during the pandemic. The Times reports that US equity funds have received close to half a trillion dollars in the past four months. Perhaps a lot of this coming out of the bond markets seeking higher returns? Potentially good news for UK banks.
Not really convinced on the threat posed by the challenger banks. Banking and even digital banking is now a commodity product largely driven by price - mortgage/lending rate etc and a large part of the current account service is free to the user. For new entrants to make a real impact they need a significantly differentiated product (e.g. Tesla) or a better price or preferably both. The big players won't (and aren't) sitting still - LBG's huge investment in digital banking is a good example. They start with the significant advantage of established scale and leverage in a commodity market. I spent a large part of my business life as a new, low price, entrant in an established commodity service market. We made some market headway and exited well but never made any material impact against the market leaders. Personally, I wouldn't bet the ranch on challenger banks even if they make progress the big guns will react and undercut on price. That's what big players do and in commodity (price driven) markets it works.
As an overview, Barclays Investment Banking Revenue has been more robust during the pandemic. Lloyds as a predominantly retail organisation is seen as much more a plain vanilla read for the UK economy. Hopefully LBG should benefit from that as the UK emerges from lockdown. Like most LBG shareholders, I can see the underlying value - let's hope the market visibility improves.
There seems to be a fair old proportion of pessimism on this board this morning especially as regards future prospects. Personally I think it unwarranted. The 2020 Operating Profit before impairment is stated at £6.4bn and the companies capitalisation is circa £28bn - so the company is valued at 4.37 times operating profit. My investment focus is always on underlying sustainable profit and LBG is a great cash producer. Of course there is a large impairment charge - we closed down the economy for months. As we emerge from this awful pandemic, impairments will gradually recede and the increased profits after impairment will be available for distribution. At that point the companies valuation multiple will, in my view, be far in excess of the current 4.37 times. Institutional investors seem to agree they hold circa 80% of the shares last time I checked.
I watched the Burford video. Quite interesting although I am not fully convinced by the chartist science. So much depends on the speed of opening up the economy. If the BoE predictions prove right and we swing quickly to substantive economic growth then clearly LBG should benefit. I am relatively optimistic and if the vaccine roll out continues as it has to date and the infection figures continue to decline then the Burford optimistic predictions could be delivered. A few "ifs" in that summary but the trends look favourable. DYOR .
Interesting reading on this board. I am a new contributor but have been a LBG shareholder for many years and have experienced the pain of too many false dawns. But maybe, just maybe, 2021/22 could be different. The history we are all familiar with; the sequential challenges of the Financial Crisis, PPI (£23bn), Endless Bexit uncertainty, and now COVID. The interesting part in that span of years 2008-2021 is that there have been remarkably few periods without nasty surprises - PPI particularly supplied an endless stream of bad news between 2011 to 2019 and a final cost which is not far off the total current value of the organisation.
So it seems to me the $64,000 question is what is the market worth of LBG if we have an extended period without major events or nasty surprises comparable to what LBG has experienced as above? I am not persuaded the answer to that question lies in the SP history over the period since the financial crisis. It just maybe that the true underlying value of the organisation may emerge.