16 September 2016

Lloyds Banking Group

Under the backdrop of a zero interest rate environment, post financial crisis de-risking and restructuring alongside continued litigation, the UK banking sector remains unloved.

by James Godrich

Fund Manager

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Price
£0.60
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52 Week High-Low
£0.77-£0.47
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Net Yield
5.02%
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Hist / Pros Per
26.8-8.3
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Equity Market Cap
£42,837m

Under the backdrop of a zero interest rate environment, post financial crisis de-risking and restructuring alongside continued litigation, the UK banking sector remains unloved. In positioning itself as one of the more prudent, low risk and sensible banks, Lloyds are in a good place to benefit when the macro cycle does turn the banks' way

One macro factor continuing to mar bank performance is Payment Protection Insurance, or PPI, with Lloyds last year putting aside an extra £4bn provision. The recent extension in the deadline by the FCA will therefore be a real disappointment to the sector but with an unconfirmed final date for claims of July 2019, the end is at least in sight.

Despite these macro headwinds the return of dividend payments by Lloyds in February 2015, alongside their 'progressive and sustainable' dividend policy, has been welcomed by shareholders. With this and the potential for some special dividends and buybacks should the bank exceed their internally recommended 13% Tier 1 common capital ratio, we see the likely return of significant cash to shareholders as supportive to the share price.


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