Broker view: Why shares in Lloyds are still a ‘hold’

25th February 2016


As Lloyds reports its full year results this week, Graham Spooner, investment research analyst at The Share Centre, explains what they mean for investors…

In its full year results reported on Thursday, banking giant Lloyds said that profits were down 7% to £1.6bn on the back of a 1% rise in revenue.

Investors should also acknowledge that the company have had to yet again set aside more provisions for PPI claims, £2.1bn in the fourth quarter.

However, it is not all doom and gloom for investors, who should be encouraged by news of a special dividend of 0.5 pence on top of a recommended dividend of 2.25 pence for 2015.

The shares were up by 9% in early trading on Thursday on the back of the results, and after a poor recent run, this could signal that investors appear to be focussing on the prospects for dividend growth and the rise in underlying profit, which was up by 5%.

The fact that the net interest margin is forecast to rise even in the wake of low interest rate, will also be an encouraging aspect for investors, alongside an encouraging view on the UK economy.

Despite the group pointing out that return on equity targets would be delayed by one year, it will be interesting to find out if the positive aspects of the results restore investor confidence and potentially bring back onto the table the sale of the governments remaining holding to the man on the street.

The chancellor and broking firms will be hoping the answer is yes, but it’s probably a bit too early for us at The Share Centre.

As a result, we continue to recommend Lloyds as a ‘hold’ and for investors interested in the sector, our preference is HSBC.

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