Lloyds Banking Group (full-year results 22 February)
While US banks can look forward to an environment of rising rates and looser regulation, UK banks have to deal with Brexit and a not-too-keen on increasing interest rates Bank of England (BoE). However, Lloyds has some benefits going for it; the government’s stake is getting steadily smaller, unlike at RBS, with the return to full private ownership now within a touching distance. The bank is also fundamentally cheap, at around 8 times forward earnings. Throw in a decent dividend of 3.4% that is expected to move towards 6% by the end of 2017 and the shares start to look very compelling.
Lloyds’ shares started the new year in fine form, breaking the downtrend that has prevailed since mid-2015. Since then they have consolidated and begun to push higher. The next target is 72p, the pre-Brexit peak, with 73.8p the one to watch if this is broken. A move below 62p would raise the prospect that the current rally has run its course.