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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

How will Lloyds shares react to its impending Embark Group buyout?

Lloyds Banking Group is close to finalising a £400m takeover of savings and retirement product firm Embark Group – its first deal since privatisation in 2017. How will this affect the value of Lloyds shares in the coming months?

  • £400m takeover of Embark Group near completion
  • Lloyds shares up 1.6% in early trading on 10 May
  • Q1 earnings of £3.7bn and declining bad credit
  • Ready to trade the Lloyds share price? Open an account today

Lloyds Banking Group is said to be on the verge of closing its first acquisition since returning as a fully privatised company in 2017. Embark Group, which handles savings and retirement products worth up to £38bn, is set to be purchased as Lloyds attempts to strengthen its insurance and wealth management arm.

Will Lloyds shares surge if its largest corporate acquisition since 2017 is finalised?

Within an hour of early trading on 10 May, the Lloyds share price had risen over 1.6% following the weekend news of its Embark Group takeover. Between October and late April, it had already rallied by more than 80%. Embark Group itself has grown in recent years through strategic acquisitions, most notably its buyout of Zurich’s retail and investment platform in 2020.

Insiders to the Embark Group takeover by Lloyds believe the move will create a more fluid channel for Scottish Widows’ mutual fund products, as part of a retail investment division that oversees assets valued at approximately £170bn.

Is the Lloyds share price undervalued given its recent Q1 earnings?

Aside from its bold, forward-thinking acquisition of Embark Group, Lloyds Banking Group is also experiencing an improvement in its fiscal outlook. Its Q1 2021 figures to the end of March 2021 registered £3.7bn in revenue, which is just 7% down year-on-year (YoY) against the Q1 2020 pre-pandemic quarter.

In addition, the group has undergone a sizeable reversal of loan loss provisions, slashing bad debt from £1.4bn in Q1 2020 to just £323m in Q1 2021. The continued positivity surrounding the easing of Covid-19 restrictions has also seen Lloyds Banking Group upgrade its targets for the full year, including profit margins and return on equity.

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Why the Bank of England’s interest rates hold the key for Lloyds

The prospect of negative interest rates has weighed heavily on the price of Lloyds shares and those of other prominent high street banks. However, the Bank of England’s Monetary Policy Committee recently voted to leave rates unchanged at 0.1%. Meanwhile upgraded economic growth forecasts by the BoE to 7.25% for the UK could see rates go up rather than down – a move that would bolster Lloyds’ profit margins.

Go long or short on the Lloyds share price today

Take your position on UK shares for just a small initial deposit with spread bets or CFDs. Spread bets are completely tax-free, while CFDs are free from stamp duty.1 You can also buy and take ownership of UK shares for just £3 with us.2

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1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

2 Deal three times or more in the previous month to qualify for our best rate.

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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. See full non-independent research disclaimer and quarterly summary.

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