Buying Lloyds shares

worried_jim

I needed the funds this month and have watched them drop 10% in a week and bottled it. Still buying some every month so am taking advantage of low prices. Expect price to increase after referendum and next trading statement in July.

bravotango

I'd invest £1000 in before Brexit.

I think you need to keep them for the long-term.

Radshire

Why?

Be interested to know is all

bowlhead99

Thrugelmir wrote: »

What direct impact does BREXIT have on Lloyds?

Lloyds is a huge UK lender. It would be particularly exposed to a downturn in the UK economy. It has warned of a negative impact of Brexit in its own financial reports. Investors say they will sell their UK assets, starting with lenders, if Britain quits the EU. Per the Times today, this will mean a fresh collapse in share prices and UK's largest banks are therefore tipped to be hardest hit.

According to the most bearish projections by analysts, Lloyds could drop 35% in the event of Brexit. RBS 25%. Barclays hit worst at 40% from current levels over 18 months. Of course, these are the most bearish projections and others are more upbeat, but they are not bullish.

bravotango wrote: »

I'd invest £1000 in before Brexit.

I think you need to keep them for the long-term.

Brexit or not, you need to keep them for the long term, as that is the most reliable way to make money from shares.

Whatever our respective beliefs on the merits of Brexit or Bremain, nobody knows what UK GDP will be in twenty to thirty years time and which scenario will produce the better result that far out. Remain camp says take the better growth now. Exit says short term blip then even better growth. If you buy shares in a bank which doesn't go under in the self-inflicted short term blip of Brexit then you will probably be very happy with your returns in a few decades time, just as you would be if there was no Brexit and no blip.

But 'invest £1000 now before a Brexit', if you have some magic foresight and know there's going to be a Brexit outcome to the vote, seems stupid. Every credible market commentator around the world has said that if there is a Brexit there will be market uncertainty which will inevitably hit the prices of large UK companies with UK-focussed lending businesses such as Lloyds. So, surely the time to buy would be after the Brexit vote and not before.

If however you think we'll vote Remain, then yes, 'invest £1000 now before a Remain' is sensible, you should see each 65p turn into 70p+ in under a week as the cloud of impending doom is lifted.

Thrugelmir wrote: »

Doesn't alter mortgage margins.

Reduced market appetite to invest in UK lenders like Lloyds means higher cost of capital and debt. You may think it doesn't matter if Lloyds borrow at 2% and lend at 3% or borrow at 6% and lend at 7%: it's still £1k profit on every £100k loaned out.

But post-Brexit economic uncertainty has impact on job security and UK asset prices. If the Chinese are no longer queuing up to buy London flats to rent out to Portuguese migrants, and London bankers are no longer getting their £50k bonuses, and regular normal UK residents are not certain whether their job prospects will support borrowing 300k at high interest rates, it will no longer cost £400k to buy a 1-bed flat.

So, Halifax are not going to be asked to lend as much mortgage money. And Lloyds aren't going to be asked for as many unsecured loans to fund home improvements or buy flashy new cars, because people's investments have tanked in value and the economy is not as bright and prosperous as it once was.

As I mentioned above, this does not necessarily spell long-term doom for Lloyds because banks are used to going through boom and bust cycles and in a few decades it will be forgotten. But given the choice, Lloyds would not want its employees or the UK public at large to vote for a Brexit and short-term self-induced economic uncertainty. Because over the next few years its business would do best from the opposite outcome.

SimonBlake

I would just WAIT. It's not a risk worth taking for the moment. You have shares in them now, just keep calm and see what happens.

There's always the Lloyds Share Sale that will eventually come too!

Thrugelmir

bowlhead99 wrote: »

regular normal UK residents are not certain whether their job prospects will support borrowing 300k at high interest rates, it will no longer cost £400k to buy a 1-bed flat.

Outside of your London centric world it's a very different place. People cannot afford £300k mortgages. Yet are getting priced out of buying property. Many around here would happily see prices fall. I'll leave it at that, as I wasn't interested in a rant about Brexit but a real analysis of Lloyds as a business.

When HBOS crashed in 2008. It's assets were larger than the entire GDP of the UK. That episode was survived . Best to keep scaremongering in perspective.

singhini

This is very interesting. I don't think anyone can answer this question but you. There are a couple of things we don't know
1 - your attitude to risk
2 - how important the £1,000 is to you
3 - how long you can afford to sit on the investment
4 - what you regard as an acceptable % ROI

If your buying more shares because the unit cost its dropping i.e was 72p and you brought some shares and now there 63p and you buy some more, yes the average price paid would be 68p and thus an increase back to 72p would still make you a small profit.

I'm no expert nor can I predict the future but if your £1,900 of shares bounce from an average purchase price of 68ish pence upto 80p over the next 24 months, your £1,900 will have grown buy 17.5% which in % terms is brilliant but in monetary terms is only £333

The question now becomes what is a realistic % growth for Lloyds over the coming months or years in the face of the whole economy (which includes a Brixit or Remain vote).

What I found interesting is back in April 1999 Lloyds shares were £6.70p so its got me thinking, is it worth me buying £2,000 worth and sitting on them for 20 years in a hope they go back to £5.00ish i.e. 3,174 shares at 63p and they grow to £5 each thus my £2,000 = £15,500ish (the opposite could be I loose £2,000 as the shares are worthless a bit like Bradford & Bingley).

Barclays = £1.65
Lloyds = 63p
HSBC = £4.31
Santander £3.03
RBS = £2.22

This has got me really thinking, surely Lloyds will go back somewhere towards a couple of quid in the next 10 years??

bigadaj

Though, of course, lloyds should have gone bust nearly ten years ago without a government bailout, so there's no surely about it.

PeacefulWaters

singhini wrote: »

This is very interesting. I don't think anyone can answer this question but you. There are a couple of things we don't know
1 - your attitude to risk
2 - how important the £1,000 is to you
3 - how long you can afford to sit on the investment
4 - what you regard as an acceptable % ROI

If your buying more shares because the unit cost its dropping i.e was 72p and you brought some shares and now there 63p and you buy some more, yes the average price paid would be 68p and thus an increase back to 72p would still make you a small profit.

I'm no expert nor can I predict the future but if your £1,900 of shares bounce from an average purchase price of 68ish pence upto 80p over the next 24 months, your £1,900 will have grown buy 17.5% which in % terms is brilliant but in monetary terms is only £333

The question now becomes what is a realistic % growth for Lloyds over the coming months or years in the face of the whole economy (which includes a Brixit or Remain vote).

What I found interesting is back in April 1999 Lloyds shares were £6.70p so its got me thinking, is it worth me buying £2,000 worth and sitting on them for 20 years in a hope they go back to £5.00ish i.e. 3,174 shares at 63p and they grow to £5 each thus my £2,000 = £15,500ish (the opposite could be I loose £2,000 as the shares are worthless a bit like Bradford & Bingley).

Barclays = £1.65
Lloyds = 63p
HSBC = £4.31
Santander £3.03
RBS = £2.22

This has got me really thinking, surely Lloyds will go back somewhere towards a couple of quid in the next 10 years??

Mad logic. Research how many shares are in circulation between then and now.

Research the asset size of Lloyds/HBOS then v LBG now.

Then you'll understand why I think your logic is mad.

Dividend growth should push the share price up. But to nowhere near £2.

Radshire

Thrugelmir wrote: »

When HBOS crashed in 2008. It's assets were larger than the entire GDP of the UK. That episode was survived . Best to keep scaremongering in perspective.

OK. Let's kee things in perspective. The crash of 2008/2009 was the worst crash the world had ever seen. HBOS had so many toxic assets on their balance sheet that they not only required a take over by Lloyds, but also a consequential Government bailout of huge proportion. Prior to this, they had good systems, had convinced the regulators that they could model risk appropriately (they were calculating capital requirements as an Advanced IRB bank) and they looked a healthy investment possibility. That is, until the bottom dropped out of the ABS/CDS markets, and investors realised that they were a sitting duck (investors shorting HBOS taking a lot of the blame for the perceived low price paid during the Lloyds takeover).

This is so serious that the management of the time are still under investigation

HBOS did not make it through. It failed. I know that the records show that LTSB bought it out, but let us not kid ourselves here. They paid over the odds for the Firm and suffered as a result.
The UK did make it through the 'episode', but it was not without considerable cost.

So, keeping things in perspective also requires one not to brush huge, previously unseen, bailouts under the carpet as 'episodes' we can survive. I would bet that the vast majority, if not everyone, would want to prevent that happening again.