26th March 2014
Lloyds Bank looks fully valued and the government placing is no reason to buy the stock says Simon Gergel, UK equities portfolio manager at Allianz Global Investors.
“The Government’s placing is no reason to buy the stock – it does not change the fundamental picture – we don’t see much value there. They already trade at a significant premium to book value and have only modest growth prospects, compared to say HSBC which looks cheaper and has better structural growth opportunities,” says Gergel, UK equities portfolio manager at Allianz Global Investors.
In a note issued this morning, he says: “Lloyds looks fully valued on 1.7x tangible book value, compared to HSBC which trades at 1.3x tangible book value and has greater exposure to growth regions of the world, such as Asia.
“The growth prospects for Lloyds in the UK are limited as the economy is mature and we believe that low interest rates and high levels of consumer and government debt will restrain economic growth and the demand for further credit. Maybe there will be less interference going forwards though Lloyds has not been impacted by the government anywhere near as much as RBS. Also the government / regulators are quite able to affect banks without owning equity in them.”