With just weeks remaining of 2023, this has been another disappointing year for the Lloyds Banking Group (LSE: LLOY) share price.
On 30 December 2022, the shares closed at 45.41p. On Friday, 8 December 2023, they closed at 46.34p, up just 2% in 2023. That said, this figure excludes dividends, which are generous from the Black Horse bank.
Share price swings
In 2023, the bank’s stock has traded in a fairly wide range. After a strong start, it hit its 2023 high of 54.33p as early as 9 February.
Within a month though, the US banking crisis sent financial stocks tumbling worldwide. As a result, the stock has never flirted with February’s highs since then. On 24 October, it slumped to a 52-week low of 39.42p, before rebounding to current levels.
Today, Lloyds is valued at £29.5bn — a modest price tag for the UK’s largest lender. Here’s how the share price has performed over six timescales (excluding dividends):
| Five days | +3.5% |
| One month | +11.0% |
| Six months | +3.0% |
| 2023 to date | +2.0% |
| One year | +1.2% |
| Five years | -12.1% |
Despite generating positive returns in periods ranging from five days to a year, the stock has lost value over five years. But adding dividends from 2019 to 2023 turns this loss into a gain.
It looks cheap to me
My wife and I bought Lloyds shares in June 2022 for 43.5p a share. To date, we have a paper gain of 6.6%, excluding dividends.
However, I hope for higher returns in 2024 onwards. It seems to me that the shares are being held back by macro-economic worries, rather than any major problems within Lloyds.
Furthermore, the stock looks deeply undervalued to me. It trades on a multiple of 6.3 times earnings, delivering an earnings yield of 16%. The dividend yield of 5.4% a year is covered a healthy 2.9 times by earnings.
What might 2024 hold?
Could double the Lloyds share price reach 92.68p in 2024, from the current 46.34p? I suspect it would take too many internal and external events to come good for this to happen, so I’d be genuinely surprised if it did. Even so, I can see three factors that could help to support the shares next year.
First, the dividend is rising strongly, with 2023’s interim payout of 0.92p a share 15% higher than 2022’s 0.8p. Were the final dividend also to increase by 15%, then it would be 1.84p. For me, this would be a vote of confidence by the bank’s board.
Second, Lloyds is shrinking its share base, buying back shares in huge numbers. With billions of pounds of spare cash on its balance sheet, I expect the bank to keep buying while its stock is cheap.
Third, analysts expect bank earnings to fall next year, pushed lower by falling interest rates and lower margins. But what if UK inflation remains stubborn, forcing the Bank of England to keep rates higher for longer?
Then again, the UK economy is looking weak and could be set to weaken even further next year. This could trigger higher loan losses and bad debts for banks, as well as harming credit growth. Also, Lloyds share have been a value trap since 2009.
Nevertheless, we won’t sell our family holding while the Lloyds share price is so low!
