SLI's A-rated Zverev: what the market is missing on Lloyds

Mikhail Zverev, Standard Life Investments' global equities head, said the market is missing a key point about Lloyds' journey to recovery.

The last 12 months have seen the state-backed lender sell down its unwanted assets, netting around £1 billion from the sale of a private equity portfolio and close to £540 million via the disposal of Australian and Irish loan books.

The sales have helped Lloyds shore up its balance sheet and reduce its exposure to risk, a strategy boss António Horta-Osório believes will create a 'stronger and safer' bank.

However, A-rated Zverev, who runs SLI's Global Equity Unconstrained fund, says the market is cumulately overlooking the fact this capital will eventually be redeployed, in his eyes making Lloyds a stand-out pick within the financials sector and where he has ploughed around 2% of his vehicle's assets.

Zverev said: 'The thing the market has missed is that when Lloyds releases that capital it gets redeployed to domestic lending, and that's where it makes a difference.

'The market is not trusting them to do this,'  Zverev added, pointing out this fear is being reflected in Lloyds' book price.

Lloyds, currently trading at  54.7p, is not the only financial where the market has been slow to recognise good news.  

Barclays has been drip feeding investors with upbeat announcements on profit and has pledged to change its culture, yet even after it posted a 26% year-on-year rise in adjusted pre-tax profit on Tuesday, the market took time to digest the news before strong trading triggered a 9% rise in shares.

Jupiter's Guy de Blonay took advantage of this scepticism and in the 40 minutes before this surge de Blonay boosted his existing position in the bank, held in his Financial Opportunities fund.

But although other managers at SLI would agree with de Blonay and argue Barclays is the place to be, in the global field Zverev said he prefers Lloyds and another holding, Lazard.