Lloyds remains top pick despite profits plummeting amid Covid-19 crisis
The UK lender published a disappointing set of first quarter results last week, but even with profits plummeting at Lloyds, the bank remains the top pick for analysts covering the sector.
Lloyds unveiled a disappointing set of first quarter (Q1) results last week, with profits down 95% after the bank was forced to take a £1.4 billion charge to cover a surge in bad loans as a result of the Covid-19 crisis.
Since releasing its Q1 results, Lloyds shares have fallen 12%, with the stock down 52% year-to-date.
‘The coronavirus pandemic presents an unprecedented social and economic challenge which is having a significant impact on people and businesses in the UK and around the world,’ Lloyds Group CEO António Horta-Osório said.
‘The economic outlook is clearly challenging with the longer term outcome dependent on the severity and length of the pandemic and the mitigating impact of Government and other measures in the UK and across the world.’
‘Throughout this period of uncertainty we will continue to work closely with Government, regulators and other authorities and use the strength of our balance sheet and business model to ensure that we play our part in supporting our customers and the UK economy,’ Horta-Osório added.
Lloyds remains top pick among analysts
Despite its disappointing set of quarterly results, Lloyds remains the top pick among analysts covering the UK banking sector.
In fact, all analysts covering Lloyds, except Citigroup, left their assessment unchanged in May, with the US-based investment bank actually upgrading it rating to ‘buy’ and issuing a target price of 42p per share, implying a potential upside of 40%.
Lloyds closed at 30p per share on Tuesday.
The rationale behind analysts assessment of Lloyds comes down to the bank’s relatively healthy balance sheet, well-discounted asset quality risks and its likelihood of emerging from the Covid-19 crisis in a far stronger position than its rivals.
Lloyds is certainly looking like the best of a bad bunch following UK banks latest earnings season, with Barclays reporting a 38% decline in pre-tax profits to £913 million, following its £2.1 billion charge to cover bad debts – which it believes will soar to as much as £4.5 billion by the end of 2020.
Then there was HSBC which, earlier this week, told investors that it may have to set aside £8.8 billion to cover loan losses in 2020, with the Covid-19 pandemic putting a major economic dent in its main markets across Asia and Europe.
How much does it cost to buy UK shares with IG?
There are two ways to ‘buy’ UK shares with IG: trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).
Remember, CFDs are derivatives, which come with higher risk and reward than investing.
Cost to get exposure to Lloyds stock
|CFD trading||Share trading|
|Action||Buy 16,000 share CFDs||Buy 16,000 shares|
|Capital required to open||£2000||£10,000|
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get commission from just 0.08% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets