54.82p +2.22 (4.22%)

This number makes Lloyds Banking Group plc a ‘buy’ for me - By Motley Fool | Mon, 11th July 2016 - 07:00

Since the EU referendum, Lloyds (LSE:LLOY) has slumped by 28%. Clearly, this is hugely disappointing for its investors and it almost doesn't need to be said that the bank's outlook is highly uncertain. A slowdown in the UK economy now seems likely and while a recession may not occur, the UK could be in for an extended period of difficulty as it slowly negotiates its exit from the EU.

This may lead investors to determine that Lloyds is a stock to avoid. After all, it's heavily exposed to the UK through its acquisition of HBOS during the credit crunch. If the UK housing market falls and consumer and business confidence comes under pressure (all of which seem likely), Lloyds could be nursing downgrades to its profit forecast.

However, these problems appear to be priced-in to Lloyds' current valuation. It trades on a price-to-earnings (P/E) ratio of just 7. That's just over half the P/E ratio of the FTSE 100 and indicates that Lloyds offers a very wide margin of safety at the present time. This indicates that if the outlook for the bank was to deteriorate, the market already appears to be pricing-in such an eventuality and so Lloyds' shares may not be hit exceptionally hard. Similarly, if Lloyds' financial performance is better than expected then its shares could be substantially uprated.

Efficient bank

Clearly, Lloyds experienced a challenging period during the credit crunch and became loss making, with a government bailout being required. Since then, Lloyds' management team has performed well to make it among the most efficient of the UK-focused banks and it now has a strong balance sheet that has been substantially de-risked.

Furthermore, the wider UK banking system is in a much stronger position than it was prior to the credit crunch. This means that even if a recession does occur, it's unlikely that it will lead to a banking crisis. As such, Lloyds' low valuation could be seen as difficult to justify given its bright long-term future.

Income prospects

In addition, Lloyds is expected to become a very enticing income play. It's due to yield 7.3% in the current financial year. Certainly, there's scope for a cut in dividends if the UK's economic outlook deteriorates, but with shareholder payouts being covered almost twice by profit, Lloyds may not need to slash dividends in such a scenario. Rather, a modest cut may be sufficient.

With interest rates likely to fall from their historic low of 0.5%, Lloyds could become an enticing income play. Therefore, investor demand for higher-yielding shares could push its valuation higher.

Based on its risk/reward ratio, Lloyds makes sense as an investment at the present time. Its future won't be easy or straightforward, but with a wide margin of safety as indicated by its low P/E ratio, the rewards could be sizeable for long-term investors.

2016 Half-Year Results

'We have delivered a good financial performance in the first half with robust underlying profit, a doubling of statutory profit and strong capital generation, along with continued progress on our strategic initiatives.

Our success in recent years has been based on our focus on and commitment to doing the right thing for customers. Our strategy of becoming the best bank for customers and shareholders remains unchanged and we will continue to support the economy and help Britain prosper.

Following the EU referendum the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors including EU negotiations and political and economic events, a deceleration of growth seems likely. The UK, however, enters this period of uncertainty from a position of strength, following continued private sector deleveraging, significantly improved mortgage affordability and low levels of unemployment. For Lloyds, our simple and low risk, UK focused, retail and commercial business model, together with the simplification and transformation of the business in recent years, position us well to continue doing the right thing for our customers and deliver strong returns for shareholders.'
António Horta-Osório, Group Chief Executive

Good financial performance with robust underlying profit, doubling of statutory profit and strong returns
· Underlying profit of £4.2 billion, down 5 per cent (2 per cent excluding TSB); underlying return on required equity of 14.0 per cent
· Total income 1 per cent lower at £8.9 billion
- Net interest income of £5.8 billion, up 1 per cent with improved margin of 2.74 per cent
- Other income 5 per cent lower at £3.1 billion, with improved performance in second quarter
· Operating costs 3 per cent lower at £4.0 billion driven by the acceleration of cost initiatives. Market-leading cost:income ratio improved to 47.8 per cent
· Asset quality remains strong with impairment charge of £245 million and asset quality ratio of 11 basis points
· Statutory profit before tax more than doubled to £2.5 billion
· Strong capital generation in second quarter of 0.5 percentage points after 0.3 percentage point impact of EU referendum
· Strong balance sheet with common equity tier 1 (CET1) ratio of 13.0 per cent post dividend (13.5 per cent pre dividend); leverage ratio of 4.7 per cent
· Tangible net assets per share of 55.0 pence (2015: 52.3 pence) after payment of 2015 final dividend of 2.0 pence

Continued acceleration of strategy in line with customers' evolving needs
· Simplification targets enhanced with additional cost initiatives now targeted
- Closure of additional c.200 branches and further c.3,000 role reductions by the end of 2017
- Simplification run-rate savings target increased from £1.0 billion to £1.4 billion by the end of 2017
- In addition, rationalisation of non-branch property portfolio to be undertaken with c.30 per cent reduction by the end of 2018

2016 guidance for NIM and cost:income ratio reaffirmed with AQR and capital generation updated
· Net interest margin for the full year of around 2.70 per cent
· Full year cost:income ratio to be lower than 2015 ratio of 49.3 per cent
· Asset quality ratio for the full year now expected to be less than 20 basis points
· The impact on the Group of the referendum is dependent on economic and political outcomes which remain uncertain, however we now expect to generate around 160 basis points of CET1 capital in 2016 pre dividend, due to the impact of the EU referendum, in particular the effect of FX rates on RWAs
· Given the uncertainty, it is too early to determine the impact on our formal longer term guidance at this stage. However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided. We will formally update guidance when we have a clearer view of likely outcomes

Dividend



· Interim ordinary dividend of 0.85 pence per share, up 13 per cent, in line with our progressive and sustainable approach to ordinary dividends.


more...

Here's what Eamonn Holmes (on Sky News) scathingly has to say about Lloyds Bank's latest '3000 jobs to go and 200 branches to close' news today:

http://www.express.co.uk/news/uk/694155/Eamonn-Holmes-Sky-News-Lloyds-bank-high-street-brexit-UK - "I don't pay to do the banking/supermarket/etc/etc job myself! We are fools to put up with this terrible service!"

Barclays Capital Equal weight 53.11 - 65.00 Reiterates

Deutsche Bank Buy 53.11 63.00 60.00 Retains

"The Financial Conduct Authority (FCA) has this morning announced that it believes plans to impose a deadline for Payment Protection Insurance (PPI) claims, as put forward in its November 2015 consultation document, should be taken forward subject to an extended consultation running to 11th October 2016. If implemented, the proposed deadline is expected to be June 2019 which is later than anticipated and may therefore require banks to set aside further provisions. For example, in its 2015 full year results, Lloyds^ (LLOY, Buy at 53p) set aside additional provisions to cover claims until mid-2018, so it is possible that an extra year’s worth of provisioning may now be required. Other banks are likely to have applied a similar assumption, in our view. Whether additional provisions are required and how material these may be is uncertain at this stage and we await further comment from the companies in this respect. However, we would not be surprised to see top-ups of a few hundred million pounds (and perhaps as high as £1bn) for each of the large UK banks, with Lloyds being the worst affected."

Cleverly crafted by the govnt to get more money from the banks to bolster spending by the public, regardless of whether the claims are genuine or not.

RBC Capital Markets today reaffirms its outperform investment rating on Lloyds Banking Group PLC ORD (LON:LLOY) and cut its price target to 70p (from 75p).

19 Sep Jefferies International Buy 57.00 68.00 67.00 Reiterates

Announce Trading Plan in Lloyds Banking Group

Intention to sell shares in Lloyds Banking Group plc through a trading plan


UKFI today announces that it intends to continue to sell Her Majesty's Treasury's ("HMT") shareholding in Lloyds Banking Group plc (the "Company") over the next twelve months through a pre-arranged trading plan that will be managed by Morgan Stanley & Co. International plc ("Morgan Stanley").

Under the trading plan, Morgan Stanley will have full discretion to effect a measured and orderly sell down of shares in the Company on behalf of HMT.

The trading plan will commence today and will terminate no later than 6 October 2017. HMT has instructed Morgan Stanley that (a) up to, but no more than, 15% of the aggregate total trading volume in the Company may be sold over the duration of the trading plan, and (b) shares may not be sold under the trading plan below a certain price per share that UKFI and HMT have determined represents fair value currently and continues to deliver value for money for the taxpayer.

HMT currently owns approximately 6.5 billion ordinary shares in the Company, which represents approximately 9.1% of the issued ordinary share capital of the Company.

Goldman Sachs International is acting as Privatisation Strategy Adviser to UKFI.

Freshfields Bruckhaus Deringer LLP is acting as Legal Counsel to UKFI in respect of English and US law.

Are Lloyds shares about to rebound?
By Alistair Strang | Tue, 11th October 2016 - 09:58

Are Lloyds shares about to rebound technical analysis trends targets share price The proximity of Halloween somehow justifies a look at Lloyds (LLOY), the retail banking sector sacrificial lamb. There's something we'll point out first, though, and it comes from our private pre-market report generated for paying clients on 9 October. We said:
If Lloyds Group experiences continued weakness below 51.8p, it will invariably lead to 50.87p with secondary (if broken) at...

What interested us was the movement to our drop target at 9:23am. We've even shown the movement with an inset on the chart, as the share reached our target, then recoiled with similar speed to a politician, when faced with a lack of expense receipt.

This sort of thing, despite it briefly breaking our target, tends to reinforce the fact we've been monitoring an important trend, as it was clear this price level meant something important to the market.

We'll get the misery out of the way before continuing.

Anything now below 50.84p signals coming weakness toward 49.1p, with secondary a hopefully bouncy bottom around 45p.



However, we're rather interested at the rebound from our given drop target and speculate that, should this bank now better 53.39p, we'd anticipate fairly near-term growth toward 54.4p, perhaps even 55.8p if bettered.

And this is where it all gets interesting, as it would imply a challenge of the immediate ruling downtrend, since movement above 'blue' will suggest the potential of a term for slight recovery, maybe even to 64.5p and a challenge of the bigger downtrend.

Reuters - State-backed Lloyds Banking Group (LLOY.L) said on Wednesday it planned to axe 1,230 jobs as part of a three-year restructuring plan aimed at cutting costs and improving returns for shareholders.

Employee union Unite branded the job losses, expected to hit the lender's retail banking, Group Operations, Customer Products & Marketing, and Finance and Risk divisions, as "horrific".

The net total of planned layoffs is inclusive of 110 new roles that will be created across these business areas, the bank said.

Lloyds announced in July it would cut a further 3,000 jobs and close 200 branches amid a more testing economic environment caused by Britain's vote to quit the European Union.

The bank has already cut about 4,000 positions from its 75,000-strong workforce in 2016 and has closed around 100 branches so far this year.

"The constant flow of job cuts across Lloyds must now be halted and staff be allowed to get on with delivering the high quality and impressive service they are so good at providing," Rob MacGregor, Unite national officer said in a statement.

"The Lloyds management pursuit of this cuts agenda is counter-productive in their aim of a successful business."

A spokeswoman for the bank said all affected employees have been briefed by managers and unions would continue to be consulted.

"This process involves taking difficult decisions, and we are committed to working through these changes in a careful and sensitive way," she said.

"Where it is necessary for employees to leave the company, it will look to achieve this by offering voluntary redundancy. Compulsory redundancies will always be a last resort."

Unite said it would oppose all planned job losses and challenge senior management to ensure affected staff are offered alternative suitable employment.

(Reporting By Sinead Cruise, editing by Andrew MacAskill and Rachel Armstrong)

Is turning today as the rest of the banks
Intraday chart had a spike most likely MAM's normal anomaly

Old report ........

Lloyds Banking: A Brexit Bargain? - By Robert Sutherland Smith 25 July 2016

Bank shares await the verdict of post-Brexit economic history. The share price chart for Lloyds at 54p gives little guidance. However, well capitalised and on above-average earnings and dividend yields (an estimated 13.6% and 7.4% consensus last seen) the shares look a hold and a speculative buy for those who take a more cheerful view of Brexit Britain. The shares appear good value on an historic 10 per cent discount to assets.

Earlier this year, after last year’s published results when the share price was 72p, I thought these shares to be good value on the basis of market consensus earnings estimates and the above average prospective divided yield. Should I still feel that way in the Brave New World ex EU membership?

Looking first at the increasingly problematic market consensus estimates, just a month after the fateful referendum, may not be all that useful because we do not know what it all means for banks in general and Lloyds in particular. However, an inability to foresee future events is nothing new and creates the opportunity for making capital gains, which depends on a truly imperfect market in which the one eyed man is always either king or aspiring political party leader. As the great Gove said (strangely in the manner of Robespierre or Trotsky) “The people have grown tired of experts.”

In the months leading to Brexit Day on 23 June 2016, the Lloyd’s share price had been trading between 65p and 72p. After Brexit, it plunged from there down to around 48p, from which it has in part recovered to 55p last seen. Going back, the share price had peaked at around 89p in May 2015, starting a fairly volatile downtrend from that point before it crashed though the bottom of the trading range.

Lloyds’ share price is some 38 per cent off the May 2015 high and up some 15 per cent from its recent post-Brexit depths. The only share price chart pattern that I am able to discern is a short-term one, possibly suggesting a short-term trading range of between 50p and 72p whilst the market tries to work out the frankly yet unknowable macro implications of disruption to the nation’s trading arrangements.

The best that we can do in those circumstances is to work out what defensive value or otherwise the share now has with which to face the slings and arrows of outrageous fortune.

The first basic fact about Lloyds bank is that it is now mainly a UK retail bank, after having thrown out any interest it might have harboured to become an all singing, all dancing, universal service investment bank. So its fortunes may be seen in terms of what happens here in the UK.

It has the advantage of scale in the UK where it reportedly has some 30 per cent share of the UK market. Its first difficulty as a retail bank must be any further lowering of interest rates, because such a move would reduce its scope for making profits between the rate paid to depositors and interest charged to borrowers – even when the deposit rates are almost invisible. The second difficulty will come from any reduction in economic demand in the UK. Given the significant depreciation of the sterling exchange rate, citizens – particularly the poorest – will have less to spend after they have settled higher energy and transport costs.

Here, we need to watch the consumer price index. Until Brexit day, real spending power was rising as wages were rising faster than inflation. That prospect now appears to be dead. All earlier earnings forecasts are now off the table and it is too early to confidently replace them with something palpable.

So what attractions does Lloyds have at this stage? First, although the share price stands at a discount to net assets, it is only by some ten percent. That is small in relation to the much bigger discounts enjoyed by international UK investment banks like Barclays and HSBC.

The devaluation of sterling is most likely to favour the investment banks with corporate and share dealing activities, as we have seen with the sudden move on Arm Holdings, which suddenly became very cheap in Japanese Yen terms. If overseas competitors are not already placing the acquisition tape measure over UK targets, we may be sure that merger and takeover chums in the City and elsewhere will already have done it in the hope of drumming corporate business. That may lead to a worsening of the UK’s balance of trade deficit – last reported as a yawning gap of between 6 – 7 per cent of UK GDP – but will probably give rise to increased City bonuses to offset the otherwise deflationary effect of devaluation. Lloyds are unlikely to benefit much from that development, although headline economic news about wages and earnings in the UK will probably have some positive effect on sentiment some months down the line.

Lloyds also has a high Basel Tier 1 capital ratio of 12.8 per cent of its total risk weighted capital. The impression has been gained by observers that, under the late Chancellor, banks had persuaded the government to ease up on capital raising requirements.

Proceeding from the particular to the general, it should not be forgotten that UK banks are in an incomparably stronger position than they were in 2008 (the onset of the world banking crisis) and are currently and seemingly in a better capital adequacy position than EU banks, which have reputedly not been re-capitalised to the same extent as the UK and US banks.

StockMarketWire.com
Lloyds Banking Group reports a robust underlying performance with strong improvement in statutory profit for the first nine month of the year.

Underlying profit was £6.1 billion (2015: £6.4 billion) with an underlying return on required equity of 13.6%. Total income was £13.2 billion

Net interest income rose by 1% to £8.6 billion, with improved margin of 2.72 per cent - Other income was 2% lower at £4.5 billion

Other highlights:
- Operating costs 2 per cent lower at £6.0 billion. Market-leading cost:income ratio improved to 47.7 per cent with positive operating jaws

- Asset quality remains strong with no deterioration in underlying portfolios. Asset quality ratio of 14 basis points

- PPI provision of £1 billion to cover further operating costs and redress

- Statutory profit before tax of £3.3 billion, more than 50 per cent higher than in 2015

- Tangible net assets per share of 54.9 pence post interim dividend (30 June 2016: 55.0 pence)

Group chief executive Antonio Horta-Osorio said: "We remain focused on delivering on our targets to support people, businesses and communities as set out in our Helping Britain Prosper Plan. We are making good progress against our strategic priorities: creating the best customer experience; becoming simpler and more efficient; and delivering sustainable growth.

"In the last 12 months we have grown net lending to SMEs by 4 per cent and have also grown net lending in both credit card balances and motor finance while continuing to grow our bulk annuity business.

"We remain committed to helping first-time buyers onto the housing ladder whilst continuing to balance risk and margin considerations versus volume in mortgages. We also continue to operate the UK's largest branch network and the largest digital bank with 12.4 million online users and 7.8 million mobile users of our top-rated apps.

"The hard work undertaken in the last five years to transform and simplify the business has allowed the UK government to sell most of its stake in the Group, returning £17 billion including dividends on its original £20 billion investment. We welcome the recent decision to recommence the sale of its shares."

He added: "The outlook for the UK economy remains uncertain, however the strength of the recovery in recent years means the UK is well positioned. The Group's transformation and successful execution of strategy, along with its competitive advantages in costs and risk, also position us well for the future and to achieve our goal of becoming the best bank for customers and shareholders."

After being 2p down after the results this morning, is now up 0.37p

yes buy buy buy a gift

Bulls back Lloyds despite PPI hit - By Lee Wild | Wed, 26th October 2016 - 12:36

Bulls back Lloyds despite PPI hit Q3 results UK retail bank cost cuts Robbed of the chance to buy the government's remaining stake in Lloyds Banking Group (LLOY) at a discount, shareholders now depend on under-pressure CEO António Horta-Osório to generate returns. Admittedly, initial reaction to third-quarter results was poor, but the numbers weren't really that bad and Lloyds has clawed back a near-4% slump.
Using latest forecasts from Deutsche Bank, the results were mixed, but hardly scary. A 3% drop in underlying pre-tax profit from £1.97 billion a year ago to £1.91 billion, was a little light. Deutsche had predicted £2.07 billion.

The broker got a £1 billion provision for payment protection insurance (PPI) spot on, yet statutory pre-tax profit was also down a smaller-than-feared 15% to £811 million. Net interest margin (NIM) - the difference between interest earned and interest paid - was a fraction better at 269 basis points (bp).

Despite being a UK-focused bank, Lloyds could struggle in the fallout of a "hard" BrexitHowever, earnings expectations have been revised upwards in recent weeks amid some high-profile calls among analysts to switch from "expensive defensives" into banks and other value plays.

"On valuation both banks and insurance companies are near the cheapest levels they have ever been in two decades," said Barclays on Tuesday, highlighting Lloyds as a value stock with earnings momentum better than the market.

And the lender does reaffirm expectations for the full-year. Look for NIM of around 270bp, a cost:income ratio below last year's 49.3%, and common equity tier 1 (CET1) capital generation - a key measure of financial strength - of 160bp pre-dividend. CET1 for the third quarter was 14.1% before the dividend and 13.4% after, up from 13% in June.

UBS analyst and Lloyds fan, Jason Napier, was quick off the mark Wednesday morning, and the numbers are there or thereabouts. Underlying profit was 2% ahead of his own estimate as better news on costs and lower-than-expected impairment charges offset a 1% drop in net interest income (NII) to £2.85 billion.

Margin was better, too, driven, says Napier, by a 1% drop in average interest-earning banking assets to £436 billion.

Interestingly, Lloyds generated an 80bp improvement in CET1 by deciding to reclassify the £20 billion of gilts held within its liquidity portfolio as "available-for-sale" rather than Wheld-to-maturity". That's because it will not now commit to holding gilts to maturity as interest rates are so low.

Without this, capital would have been a miss at 12.6%, points out Deutsche's Lock. However, "a beat is a beat", he says, adding, "13.4% CET1 should provide Lloyds the headroom to pay the 3p dividend that we and consensus expect for 2016 (requires 20-30bps capital generation in 4Q16), giving comfort for those focused on the dividend line."

On costs, Horta-Osório has made further progress. Shutting branches and penny-pinching elsewhere - the so-called simplification programme - has delivered £774 million of annual run-rate savings so far. It should be £1.4 billion by the end of 2017.

At around 55p, Lloyds shares trade pretty much in line with tangible net asset value (TNAV) of 54.9pOf course, low interest rates are bad for banks, and there's little sign that UK borrowing costs will increase up any time soon.

Despite being a UK-focused bank, Lloyds could struggle in the fallout of a "hard" Brexit, and a decision by the Financial Conduct Authority (FCA) to extend the deadline for PPI claims by a year to June 2019 has triggered extra provisions.

However, finance director George Culmer has said this will be "the last big PPI provision" before deadline day.

At around 55p, Lloyds shares trade pretty much in line with tangible net asset value (TNAV) of 54.9p. Using UBS estimates for full-year earnings per share (EPS) of 6p in 2017, down from an anticipated 7.2p this year, a forward price/earnings (PE) ratio of 9.2 times is hardly expensive.

Napier blames pressure on revenue and loan losses coming through for the drop in EPS next year. But he likes the opportunity for "proactive management of the P&L" offered by better costs and deposit re-pricing. "Crucially, capital generation - the raw material for our positive view on dividends - remains good," he says.

Add a 13% return on tangible equity (ROTE) into the mix, plus 5-7% running yield, and Napier still thinks Lloyds is "attractively valued". He repeats his 'buy' rating and 65p price target, and above-consensus forecast for a dividend yield above 7% for 2017.

Her Majesty's Treasury < 9%

Barclays Capital Equal weight 55.25 65.00 55.00 Reiterates

JP Morgan Cazenove Neutral 56.02 62.00 62.00 Reiterates

Natixis Neutral 56.02 56.00 56.00 Retains