Buying Lloyds shares

bowlhead99

Thrugelmir wrote: »

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.

Sure, then replace £300k with £150k. People would happily see prices fall and then they could afford houses... without borrowing so much. How does that impact lenders who desire to lend as much as possible? Not positively.

You asked how Brexit could affect Lloyds. Economic uncertainty within your target market is not desirable when you are a bank; you may have positioned your business to have what you feel is a relatively low risk business model but you can't be immune to macro shocks. Such as those which are likely to be caused by a Brexit.

Of course, that is but a generalisation. You say you want real analysis. I don't see what is in it for me in attempting detailed analysis for you, because if I were to list a number of examples of how the Lloyds business and/or share price could be adversely affected by a Brexit you may characterise it as 'a rant about Brexit' in which you are not interested, as you did with the first examples, and I will have wasted my time. So I must shrug and move on.

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.

It survived, with a huge bailout, because when debt and equity holders were not willing or able to support the level of assets, the government stepped in. The original shareholders were left with vastly-reduced value for themselves.

Presumably, OP is not looking to merely 'survive' but grow assets; and not be squeezed out or put in a position where he sells at a large loss. I have made the point that we don't know whether exit or remain will be better for Lloyds in the long long term and that in a few decades it will be forgotten. But to my mind it does not make much sense to pour more money into shares of an individual bank in which you're already invested unless you particularly want to take on that extra risk and have faith in the 'remain' vote prevailing.

Otherwise it makes more sense to invest in a collective investment scheme instead, or if you really want the individual stock but are nervous about buying it, wait for the knife-edge event whose result will be known in a week's time.

singhini wrote: »

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??

The fact that Barclays is priced between £1-2 and RBS £2-3 and HSBC between £4-6 in the last year or so does not mean that Lloyds should be at that price. There is no rule of thumb that if you are successful you should be priced between £2-6. The share price is a function of what the whole company is worth and how many shares happen to be in issue.

Lloyds is valued by the market at getting on for £50bn but has seventy billion shares in issue so each share is worth less than a pound. By contrast, RBS is valued at £25-30bn and has less than twelve billion shares in issue, so each one is worth more than two pounds each.

So, looking at a list of share prices of other big banks and saying their share price in pence all have three digits in them so Lloyds should be up at a couple of pounds or more instead of 60-70p, in the not too distant future, is just silly.

At 65p on Friday, Lloyds was worth £46bn. For it to be worth 500p, the share price would have to go up by a factor of 7.7, and then the company would be valued at £350bn. Compound annual growth of the company's value at almost 11% a year would get you there. However, is it reasonable for the banks fortunes to improve so aggressively?

At the moment they have 22 million current account customers and 21m savings account customers. If those products become so much more popular that they get 165m customers, that would give you the 7.7x growth in two decades. However, it would require them to have every UK resident as a customer and 100million from somewhere else. So, as they are not going to get that while staying as a UK retail banking business, you have to hope those customers are doing much more business per person, instead.

Pincher

If recovery to 72p was certain, you'll find the market shelves marked 64p is empty. You either place the bet or not.

My limit order hit at 61.50p on 16th June.

2.75p annual dividend is 4.4% (= 2.75p / 62p) return.

Since I was getting 1% interest from NS&I, which attracts 20% tax, 7.5% dividend tax at basic rate on 4.4% is nicer, assuming the dividend pay out continues. £1,000 Savings allowance used up, £5,000 Dividend allowance expected to be used up, hence 7.5% dividend tax.

If it does recover to ~72p, which is 16.1% = (( 72 - 62 ) / 62) return in the form of capital gains, even better. I can sell some to use up the remainder CGT Allowance. Even if I sell the lot, and it goes over the CGT Allowance, so what, it's only 10% tax.

If it goes down to 40p, but still pays dividend at 4.4%, it's better than 1% interest at 20% tax.

Yes, the gamble is it goes down and stops paying dividend, and really ruin your lunch.

bowlhead99

Pincher wrote: »

2.75p annual dividend is 4.4% (= 2.75p / 62p) return.

Since I was getting 1% interest from NS&I, which attracts 20% tax, 7.5% dividend tax at basic rate on 4.4% is nicer, assuming the dividend pay out continues.

Almost a fifth of the dividend was specifically documented as a 'special dividend' rather than a 2015 interim or final dividend, because it is not expected to continue - it is just some spare money that they had hanging around after getting happy with their capital position, and gave back to their owners as a one-off.

You should not expect them to pay you 2.75p a year. They deliberately pulled the 50p aside and called it a 'special' one-off so that investors would not have the expectation that it should be expected to continue.

Pincher

bowlhead99 wrote: »

You should not expect them to pay you 2.75p a year. They deliberately pulled the 50p aside and called it a 'special' one-off so that investors would not have the expectation that it should be expected to continue.

Dividend Cover for 2015 is 5.67, so there is some head room for growth, hopefully.

Interim 0.75p
Final 1.50p
Special 0.50p

2.25p is still better than 1% from NS&I.

I prefer to profit take to use up the remainder CGT allowance any way. The hold and take dividend is Plan B.

I got the HSBC 4th interim dividend around April, which was also kind of "special". At Dividend cover of 1.32, you could say the likelihood of pay out is shakier. Bought some more at £4.25. I think that is a long term keeper.

Dividend US$0.51 ~= 35p.

8.2% = 35p / £4.25

More global than Lloyds. Also, US$ denominated dividend if sterling should tank by 20%.

wary

ps3home wrote: »

So, I've purchased £900 worth of Lloyds shares at 0.72p per share. (they've fallen since due to Brexit). Do you think it would be a good idea to buy another £1000 in Lloyds before the Brexit? I should have waited a little longer as they're now 0.63p.

Lloyds currently up a further 6% today. I hope you bought!

Pincher

Went out to a garden centre, came back ~5pm, and the limit order hit! :j

Order type: LIMIT SALE
Order dealt on: 20JUN2016 at 15:28:58
Dealt price: GBP 0.69901



Order type: LIMIT PURCHASE
Order dealt on: 16JUN2016 at 14:19:26
Dealt price: GBP 0.61500


Roughly 13% profit, after stamp duty.

The 16th June trade hasn't even settled yet. :rotfl:

The struggle to 70p was so tortuous, looking at the trades.
The buyers really didn't want to pay 70p.

That's why I make it easy on them, and set the limit at 69.9p.
Aren't I kind?

Oh well, used up my £11,100 capital gains allowance for the year.

Westie983

Good news for my share save scheme.... :-)

bowlhead99

Lloyds opened at about 50p today but bounced back up to 56p in the first quarter of an hour.

If nothing else, you can at least say you were right not to buy your second £1000 before the vote results.