Is the Lloyds share price high enough now?

Every
time
I
look
at
the

Lloyds
Banking
Group
(LSE:
LLOY)
share
price,
I
just
think
it’s
too
low.

The
trouble
is,
I’ve
thought
that
for
years.
But
the
market,
stubborn
as
it
is,
just
won’t
listen
to
me.
Or
is
it
me
who
should
listen
to
the
market?

Now
Lloyds
shares
have
moved
ahead
in
the
past
couple
of
months,
and
hover
around
50p,
it’s
time
to
ask
myself
one
key
thing.
Is
that
as
far
as
they’re
likely
to
go,
at
least
for
now?

Looking
cheap?

On
fundamental
measures,
Lloyds
shares
still
look
cheap.
There’s
a
forecast
price-to-earnings
(P/E)
ratio
of
nine,
dropping
to
six
on
2026
forecasts.
And
a
5.4%
dividend
yield,
which
could
approach
7%
in
that
time.
These
suggest
the
price
is
too
low.

Measures
that
are
perhaps
more
useful
to
bank
investors
look
bright
too.
We’re
looking
at
a

price
to
book
ratio,
which
gives
us
an
idea
of
a
stock
valuation
compared
to
underlying
assets,
of
about
0.8.

So
Lloyds
is
worth
less
than
the
value
of
its
assets?
The
future
of
its
actual
business
isn’t
worth
anything?

On
a
related
measure,
the
board
expects
a

return
on
tangible
equity
of
around
13
for
2024.
In

bank
valuation
terms,
that’s
strong.

Not
all
roses

But
it
can’t
all
be
this
good,
right?
Well,
no,
it
isn’t.
A
few
things
count
against
Lloyds
right
now.

First
is
the
prospect
of
interest
rates
cuts.
They’d
affect
Lloyds
business,
like
mortgage
lending
and
general
retail
banking,
in
different
ways.
But
the
net
result
should
be
lower
lending
margins.

Then
the
forecast
return
on
equity
is
below
2023’s
figure.
And
there’s
a
good
chance
that
2025’s
will
be
lower
again.

And
unlike
some
other
banks,
Lloyds
no
longer
has
any
investment
banking
business
to
boost
its
profits.
The
2008
bank
crash
showed
how
risky
it
can
be.
But
at
the
same
time,
it’s
potentially
lucrative.

Regulation

UK
banking
regulations
are
a
lot
stronger
now.
So
investment
banking
risk
should
be
lower.
But
it
might
be
a
reason
why

Barclays,
still
big
in
that
business,
might
be
more
profitable
in
the
next
few
years.

Or
why

HSBC
Holdings,
with
its
focus
on
the
China
region,
could
have
greater
long-term
appeal.

And
speaking
of
regulation,
Lloyds
is
preparing
itself
for
a
potential
penalty.
It’s
just
set
aside
£450m
on
the
back
of
car
loan
mis-selling
claims
from
the
Financial
Conduct
Authority
(FCA).

Doesn’t
it
seem
like
there’s
some
sort
of
banking
scandal
round
every
corner?
It’s
not
helping
sentiment
towards
the
sector.

Share
price

I’m
no
good
at
short-term
predictions,
so
please
just
take
this
as
a
guess.
But
I
really
could
see
the
Lloyds
share
price
not
getting
much
above
50p
for
at
least
the
next
couple
of
years.
Until
the
economy
settles,
and
we
get
a
sight
of
the
longer-term
outlook.

But
I
wouldn’t
mind
that.
I’d
be
happy
to
keep
taking
the
dividends.
And
maybe
buy
some
more
shares.