Will Lloyds’ bold foray into home rental bear fruit?

UK banking giant Lloyds has set an ambitious target of owning 50,000 homes in the next decade.

  • Lloyds (LON: LLOY) share price slips to 44.09p per share on Friday (30 Aug)
  • The lender is entering the home rental market, hoping to become a giant UK landlord
  • Analysts are mostly bullish on the stock, on average targeting 8.4% upside
  • Keen to trade Lloyds shares? Open an account with us to start trading the stock.

Lloyds stock price stumbles

Shares of British financial conglomerate Lloyds fell 0.3% to close at 44.09 pence on Friday in London.

The UK’s largest mortgage lender is venturing into the home rental market, and internal documents recently revealed the scale of its goal.

As of Sunday, research teams were largely optimistic on the LLOY stock, with 16 recommending ‘buy’, seven suggesting ‘hold’, and three with ‘sell’ calls.

Their average 12-month target price stood at 52.49p, Bloomberg data showed. That implies a potential upside of 8.4% based on Friday’s close.

Lloyds’ move into property: What might it entail?

Lloyds is diversifying into residential property investment through the UK’s build-to-rent sector. It hopes to become one of the country’s biggest private landlords.

The bank is aiming to buy 10,000 homes by the end of 2025, before reaching 50,000 properties by 2030, based on an internal job advertisement, The Financial Times (FT) reported.

The lender estimated that with 10,000 homes, its Citra Living brand will have a balance sheet worth about £4 billion and generate some £300 million in pre-tax profit.

Heather Powell, partner at tax firm Blick Rothenberg, questioned whether the new homes Lloyds plans to buy will meet the needs of the majority of people ‘who are searching for affordable, not new, homes’.

FT columnist Helen Thomas opined that the property play was another sign of banks hunting for new revenue streams amid rock-bottom interest rates.

Thomas also described the retail bank’s aspirations as ‘surprisingly big’, partly because Lloyds may face reputational pitfalls in tenant management, and is also getting into housing equity ‘at a point when plenty of others looking for long-term, inflation-linked returns are doing the same’.

‘A strategic shift in search of returns into an at-best adjacent market seems the real risk here,’ she added.

Should you take a chance on Lloyds?

Read how you can trade Lloyds shares here.

Go short and long with CFDs on Lloyds and 16,000+ shares with the SG’s No.1 platform.* Learn more about trading shares with us, or open an account to get started today.

* Awarded the Best Online Trading Platform by Influential Brands in 2021.

How do analysts view the stock?

Barclays, maintaining an ‘overweight’ call and 62p price target, sees ‘significant value’ in LLOY shares.

‘We see Lloyds as best placed to deliver double-digit RoTE (return on tangible equity), consensus-beating earnings, whilst also benefitting from likely write-backs,’ Barclays analysts noted.

Its new CEO Charlie Nunn ‘will need to confirm the approach to surplus capital returns, likely alongside a new medium-term strategy, with FY21 results’, Barclays added.

Meanwhile, Bloomberg Intelligence (BI) wrote that the uptick in UK mortgage demand has been ‘a powerful tailwind’ for UK banks.

However, despite the mortgage market’s attractiveness, Lloyds has said that more competitive pricing and several other sectors would ensure it remained disciplined in its underwriting.

‘While the strength in pipeline for 3Q mortgage volumes was also highlighted, Lloyds’ view that a slowdown is due in 4Q… tallies with our thinking and should slow the housing market,’ BI added.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.