Why everyone is excited about Lloyds shares again

New global banking rules look set to be watered down, adding to the reasons to buy Lloyds, say analysts.

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by Deborah Hyde on Jul 28, 2010 at 10:33

Marques points out that the weaker banks are outperforming this week - with RBS the top gainer again today - but believes Lloyds is a better medium term story.

Even though revenues are likely to fall he believes the turnaround at Lloyds will boost value for investors and will more than make up for the impact of the upcoming government spending cuts.

'Lloyds is more driven by its own internal restructuring potential and hence less affected by (although far from immune) a slightly more stagnant UK macro,' he said.

He said there are concerns about funding at Lloyds but is convinced Bank of England support will remain in place for as long as the wholesale markets remain ‘wobbly’.

He expects profits at the banking group to double between 2009 and 2012, driven by lower costs and impairments.

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7 comments so far. Why not have your say?

So why Lloyds?

Today on IG Index at 11.20am

Lloyds - 2.43%

Barclays - .19

HSBC + .81%

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Shutting the stable door was always going to be a dangerous exercise wrt to the banks Basel 3 is not conducive to creating the stability within banking that we need to continue on an economic recovery. In time asset prices will recover further materially improving tier 1 ratios. LLOY has always maintained that HBOS made commercial sense I am sure that it will and LLOY will become a colossus. I have long said that this is an opportunity of a life time to get in at a ridiculous price, The analysts are now beginning to come out of hiding- why wait until the squid and other prop desks have finished loading up before getting in.

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Q2 Results due next Wednesday. I recall one analyst stating 'fair value' at 114p. Interesting times ahead...

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Form USA banks experiance, when the govermnet will start seling LLOY shares

the price will fall back.

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Banks are lending at a margin above base rate of 0.5% but they are having to pay well over base rate to raise deposits.

Hence interest rate margins are squeezed.

Only when bank base rate goes back above the inflation rate will bank margins begin to return to normal - and evn then it will take years to take effect.

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What I've read, and please correct if this is wrong, is that banks have been able to borrow cheap and lend at a high margin. The regulations mean it isn't easy to set up as a bank in the UK, so banks can pay pathetic rates on cash ISAs for instance due to the lack of competition.

I would have thought that being able to hold less cash makes them pro-cyclical rather than more profitable in all conditions. If so, if that is exciting it indicates an appetite for risk. I can't say it's got me especially excited.

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the Mekon

Aug 01, 2010 at 20:00

HSBC's internal processes were a lot slicker than Lloyd's. Try operating accounts under each banner. They should have gone for best of breed in the merge/takeover but they did not. A pity that 2nd best is thought of as good. If Lloyds management doesn't know that and act on it, they can't be top drawer.

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