Lloyds Banking Group (LSE: LLOY) ended October by beating third-quarter forecasts. The high-street bank posted a £1bn pre-tax profit. That’s a big turnaround from the £676m loss booked in Q2. Lloyds’ share of the mortgage market, which is really starting to brighten, now stands at an impressive 22%. And deposits are up 9%. Yet the Lloyds share price gone nowhere as a result.
Since market close the day before the Q3 update, to the time of writing today, the Lloyds share price has moved by precisely zero pence, zero percent. Meanwhile, the FTSE 100 is up 3.5% over the same timescale, as world stock markets respond to the so-called Biden bounce.
Since the calls came in that Joe Biden has beaten Donald Trump in the race for 270 electoral college votes, world stock markets have been jumping. In Japan, the Nikkei gained 2%, and European stocks are higher. The US Dow Jones is up 5% in the past week, and the Nasdaq has climbed 9%. The Lloyds share price… zilch.
Lloyds share price: immune to good news?
Meanwhile, there are early indications that the President-elect is keen to conclude a trade deal with the UK, and EU-UK trade talks are continuing. In short, I’m looking at a week of possibly the best news I’ve seen since this pandemic struck. And yet, the Lloyds share price still won’t budge. It seems it’s immune to good news.
It’s almost enough to make long-term holders like me throw in the towel and sell out. Given my track record with the stock, I wouldn’t be surprised if that turned out to be the trigger for an uprating, and I’d deserve the thanks of other shareholders if nothing else. But no, I’m not going to sell, as I think that could be the worst thing to do right now.
Why I’d buy Lloyds now
For the nine months to 30 September, Lloyds has made a profit of £927m after tax. That compares to £1,554m for the same period a year ago. Now, that does include a tax credit of £307m this year, against a tax charge of £1,008m last year. But it’s still quite a bit better than I’d been expecting. And better than the City’s analysts had expected too.
If I didn’t have some already, I’d definitely buy at the current Lloyds share price. I’d buy for both growth and income. Looking to the latter first, we don’t have any dividend news in Lloyds’ Q3 update, and this year’s is pretty much wiped out. But forecasts indicate a payment of around 1.6p for 2021, which would provide a yield of close to 6%. I think it will be some time before we get back to pre-pandemic yields, but the dividend was probably getting a bit stretched anyway, so that’s probably not a bad thing.
On the growth front, we’re looking at a forecast 2021 P/E of less than eight. I can see at least a 50% upside to that, barring any further unexpected calamity.
Stop Press: News of a 90% success rate for the Pfizer vaccine trials has just boosted the FTSE 100 and pushed the Lloyds share price up 9%. Could this be the start?
