Stock of the day 19/02/2016 – Lloyds Banking Group PLC

With Lloyds languishing just above its 2 and a half year-plus lows can the beleaguered bank bounce back with its full year figures next Thursday?

Things weren’t looking too bad for Lloyds in the first half of the year, the bank nearing 90p (for the first time since the end of 2009) in the post-Tory election win buzz of early May. However a sustained fall between then and the end of October (with a brief move upwards thanks to news at the start of the month that the government was planning to sell a £2 billion stake in the bank to the public) left the stock at 77p on the eve of its third quarter results.


(Source: IT-Finance.com 19/02/2016)

Those figures only made things worse for Lloyds; whilst it managed to see a 26.6% increase in pre-tax profits to £958 million, any good will arising from the impressive growth was hampered by the fact that the bank’s underlying profits had fallen to £1.97 billion from £2.16 billion year-on year, with revenue dropping 4% to £4.2 billion. Even more damningly, Lloyds revealed that it had to set aside another £500 million for PPI compensation, taking the total to a staggering £13.9 billion. Understandably investors weren’t too pleased with these figures, putting the stock on track to hit a 2015 low of 69p by the middle of December, before closing out the year at 73p.

Lloyds suffered more than most in the dire trading that open 2016, plunging back to 65p by the end of January, with news that George Osborne was delaying the public share sale of the government’s stake due to ongoing global market turmoil eroding the bank’s price only heightening investors’ aversion to company. Add onto that the intensified fears over the state of the European banking sector that appeared at the start of February and Lloyds hit 56p by the 11th of the month, its worst price since its rights issue at the end of November 2009. The stock has, however, rebounded from those lows as the global markets have begun to recover, sitting at a current trading price of 63p (IT-Finance.com, 19/02/2016).

Worryingly for Lloyds, analysts are expecting the bank to book another £2 billion in PPI provisions for the fourth quarter; something that may well override another of the company’s other headline figures next Thursday.

Lloyds Banking Group PLC has a consensus rating of ‘Buy’ with an average target price of 95p.