Lloyds’ (LSE: LLOY) (NYSE: LYG.US) shares have had a rocky year and have only gained 1.9% year to date. However, 2015 is set to be a transformational year for the bank, as the group’s recovery comes to an end and Lloyds starts to grow.
This growth is just one of the many catalysts that could drive Lloyds’s share price up to, and above 100p during 2015.
Multiple catalysts
As Lloyds moves from its recovery stage, towards growth, the bank’s underlying profitability is exploding. City analysts are already forecasting that the bank will report a pre-tax profit of £6.5bn this year, followed by a pre-tax profit of £7.5bn next year. On a per-share basis, that translates into earnings of 7.8p per share for 2014, followed by EPS of 8.2p for 2015.
With the UK economy roaring back to life, there’s a chance that these forecasts could be revised higher as Lloyds benefits from a higher level of lending and a reduced number of underperforming loans. Rising income is just one of the many catalyst that could drive Lloyds’ shares higher during 2015.
For example, Lloyds’ share price will also receive a boost from the results of the Bank of England’s stress tests. The results of these tests are due next year. Unfortunately, Lloyds’ performance in the European Central Bank’s stress tests hardly inspired confidence in the bank — Lloyds passed the European Banking Authority’s test with a stressed ratio of 6.2%, the pass rate was a ratio of greater than 5.5%.
However, Lloyds’ management noted that 2013’s figures were used for the ECB’s test, whereas the BoE’s tests will use more up-to-date numbers, which should give a clearer picture of the bank’s finances.
In addition, management’s reinstatement of the bank’s dividend payout should also help improve investor sentiment. That being said, as we move into December, time is running out for the bank to reinstate its dividend payout this year.
So, it’s now more than likely that Lloyds’ management will put-off the dividend announcement until next year. Nevertheless, reinstating the dividend payout is likely to be another catalyst that will drive Lloyds’ share price higher.
And lastly, as Lloyds’ shares push higher, it’s likely that the government will decide to sell-off some more of its shares in the recovering lender.
The Treasury still owns around 25% of Lloyds following its £20bn bailout of the bank during the 2008 financial crisis. Further share sales by the Treasury could have a positive effect on Lloyds’ share price, as the government’s influence at the bank dissipates and more shares are available for trading.
Foolish summary
All in all, there are several catalysts that could sent Lloyds’ shares surging higher over the next year but only you can decided if Lloyds fits in your portfolio. I’d strongly suggest you look a little closer at the company before making any trading decision.
