Schroder UK Alpha Plus Fund update -- By Richard Troue - Thu 09 September 2010

Never one to be afraid of going against the crowd, Richard Buxton, manager of the Schroder UK Alpha Plus Fund, is currently very positive on the UK consumer and banking sectors at a time when many are predicting doom and gloom.

In support of his view Richard Buxton cites an overwhelmingly positive first half results season and improvements in company finances as the benefits of restructuring in the wake of the recession begin to show through. This doesnt mean were set for a walk in the park. He suggests growth will be sluggish and UK public spending cuts, set to be announced later in the year, could be more severe than many expect. However, he believes this will create attractive stock picking opportunities.

In the banking sector he is particularly positive on Lloyds Banking Group, the portfolios largest holding at 4.8%, believing the company will see significant profits, and has huge earnings potential over the long term. In total just over 24% of the fund is invested in financial companies.

75.85p +1.20p

2nd day moving higher on a good way, on news and MACD moving bullish

Back the banks
Lloyds Banking Group led the Footsie rally last week after several analysts updated their outlook for the stock. Leigh Goodwin at Citi said: UK domestic banks still offer long-term value. We continue to rate Lloyds as a medium-risk buy, and we also upgrade RBS to a buy, principally on valuation grounds. Richard Buxton at Schroders is maintaining his equity positions and his biggest holding is in Lloyds, which he said still looks cheap. The stock is down 28% over 12 months, although it has rallied 36% over the past three months.

.the sunday times

There is chances that LLOY will buy back its own shares when UKFI decide to sell their stake to the market

A very strong start of the day as the FTSE open well up. is now on a position were is ready for a BREAKOUT @ 77.68p

LONDON MARKETS
The main topic of conversation in the City today was the weekend's agreement with the Basel Committee raising banks capital requirements. Banks will have to triple their levels of reserves under the new rules which will be introduced between 2015 and 2018.

With the new rules considered more benign than feared in many quarters, especially the timetable for change, Lloyds led the UK banks higher, rising 2.12p at 77.74p. Royal Bank of Scotland added 1.27p at 49.8p and Barclays rose 1.65p at 320.75p.

Lloyds' boss Eric Daniels will step down next year
by Deborah Hyde on Sep 20, 2010 at 17:20

The search has begun for a replacement for Lloyds chief executive Eric Daniels, the man once dubbed 'the quiet American', who took the bank through the credit crunch and the controversial acquisition of HBOS.

Lloyds Banking Group has confirmed that chief executive Eric Daniels will step down next year.

Group chairman Win Bischoff said the merger between Lloyds and HBOS and the sooner-than-expected return to profitability are 'testament to Daniels' disciplined and vigorous leadership during a time of unprecedented financial turmoil.'

However, shareholders have been less enthusiastic about the bank's decision to buy HBOS, a move that devastated its share price and forced the bank to go cap in hand to the government and surrender a 41% stake in the business.

Even before today's news was announced, rumours had been circulating that Daniels' time at the helm of Lloyds was numbered given shares remian far below the level they were at before the bank bought HBOS.

Helen Weir, head of retail banking, is seen as the most likely internal candidate to repalce Daniels. Other suggestions include Graham Beale, chief executive of Nationwide and Douglas Flint, current finance director at HSBC.

Les Ames, head of dealing at WH Ireland, hoped the board would select someone who was already a chief executive. 'I don't think someone who has only been a finance director will have had broad enough experience,' he said.

He favoured Mervyn Davies, former chief executive of Standard Chartered, who enjoyed a brief spell as trade minister under the Labour government and is currently vice chairman of US private equity firm Corsair Capital.

Joseph Dickerson, banks analyst at Execution Noble was one of the first to predict Lloyds could be back in the black this year. Like Ames, he thinks the bank needs a competent CEO with 'hands-on experience'.

'Given the retail focus which is set to increase in terms of its contribution to the banks profits a consumer banking background would be helpful. With the c40% government stake, political sensitivity would be helpful too,' he said.



Whoever replaces Daniels will have an awful lot to prove as Lloyds has beaten market expectations on profits over the last few quarters. Many believe conditions will begin to get tougher again from next year as government spending cuts lift unemployment and could lead to a rise in bad loans, making it more difficult for the bank to keep beating expectations.

The group has so far decided against selling any of its branches as a result of receiving state aid. It has until 2015 to do so and wants to focus on building its business first.

But shareholders have reportedly become anxious to receive a return on their investment given the European Commission said last summer that Lloyds cannot pay a dividend or return cash to shareholders until 2012. The ban was a condition for approving the purchase of HBOS - something Lloyds would not have been allowed to do under normal competition rules.

The bank also needs to prepare for next summer's independent commission on banking which is expected to investigate whether banks treat their customers fairly or charge too much.

Most importantly of all, the bank needs to replace tens of billions of pounds of loans from the Bank of England and other loans that fall due over the next couple of years and has to find a way of extricating itself from the government's clutches.

A report in the Sunday Times suggested the bank was considering spending billions of pounds to buy back government shares after leading institutional investors demanded Lloyds find new ways to make them money.

Mike Trippitt, banking analyst at Oriel Securities, said Lloyds had around 20 billion of excess cash to fund such a move. He calculated a 10 billion buy-back at 75p would increase 2011 and 2012 earnings per share by around 7% in 2011 and 16% in 2012, assuming a 4% loss of earnings on the excess capital.

However, others think the government may be reluctant to take Lloyds' money now for fear that the shares will rise later leaving it open to criticism that it missed out on a much larger profit.

Given the Bank of England today confirmed that the bank - alongside its peers - has failed to pass on lower interest rates to its customers, the government may also want to keep hold of its stake in a hope it can use its influence to ensure the bank begins to lend more and to stop squeezing its customers.

With so much to tackle at lloyds, Dickerson hopes the board will move fast to find a replacement, warning that if it drags its heels that could create a so-called overhang which would hobble the shares.

Wanting to do a higher BREAKOUT now at 78.80p was over 79p a bit earlier

Hi all
When are the interim results/update due, please.
Many thanks in anticipation
Edward

edward33

Just like you I do not know, so you know what to do ....

research around the company RNS, phone the company or do an engine check

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All banks very strong this afternoon rising 3.3% but in the US is UP 4.4%

Last interims were on 4th August.

Thank You very much

All the best

Edward

I wonder if this is a buy again after the pause for breath - any thoughts anyone?

Interim Management Statement due Tuesday, 2nd November 2010. SP should be nudging 80p before then in anticipation of excellent trading, particularly as more & more of the "old" fixed rate mortgages have reverted to the far more profitable Variable Rate Mortgages combined with lower bad loan provisions. Definitely a "BUY". I still stand by my earlier SP predictions - 85p by end 2010 & 100p by Feb 2011 when Finals announced.

Anyone think its likely that it'll reach mid 80's after the 2nd November statment then?

I hope so

Seems a little less likely with the news today! Still a fair few days left though...

I had expected the sp to show a small rise on the job losses - evidence of driving down costs/improving intergation/synergy of the merged businesses.

I doubt cutting jobs will really ever have a positive effect, well especially in this economy with unemployment so high already etc...

Usually job losses does mean a leaner more efficient company, which is then reflected in profitability. Exposure to the UK mortgage market looks to be the negative weight on this stock, imo.