So what about the Lloyds Banking Group (LSE: LLOY) share price then? Well, love it or hate it, we surely shouldn’t ignore it.
Either we’re looking at a bank that’s on the skids and faces years of hardship. Or this is one of the cheapest stocks on the whole FTSE 100 right now.
Maybe it’s just me, but I can’t really see anything between those two extremes. And as I’ve bought Lloyds shares and I plan to buy more, it’s easy to see which side I come down on.
There are threats though. And the main one has to be from Lloyds exposure to the property market.
Property threat
The bank is the UK’s biggest mortgage lender. But it goes deeper than that, as Lloyds is getting into the build-to-rent market. Some even suggest it could become the country’s biggest landlord.
That’s led one of our readers to ask an interesting question. Doesn’t it mean that if Lloyds has to foreclose on any bad home loans, it means it could just add them to its portfolio of rental properties?
It’s a nice thought, but it doesn’t really work that way for Lloyds. The bank is in the rental business through its Citra Living arm, and that handles building and renting new properties.
Foreclosing and repossessing is a complex and expensive business, and lenders will do almost anything to avoid it. Lloyds just doesn’t want to build of a lot of individual rental homes like that.
Bad loan charges
The risk from bad loans is clear from Lloyds’ recent results. In the nine months to September 2023, it had to record an impairment charge of £849m.
That’s not too big a rise after the £662m set aside at the halfway stage. But on top of a 2022 impairment charge of £1.51bn, it’s adding up. And we’re beginning to see the cumulative pains from high interest rates.
It looks likely that the total charge for 2023 will be less than for 2022, with full-year results due on 22 February. But it does make me feel the shares could stay low for some time to come through 2024.
Still, for me that would be good news. Ignoring the Lloyds share price is the last thing I want to do in 2024. When the top FTSE 100 stocks in my favourite stock market sector are down in the dumps, how could I not be riveted to them?
Cheap shares = buy?
I want to buy more bank shares, including Lloyds, as I save the cash in the coming months. And that means I’ll be happy for the price to stay low.
The forecast price-to-earnings (P/E) ratio is only around six for the next few years, with dividend yields up around 6%.
I reckon any investor who thinks the property and banking sectors have strong long-term prospects, and who can handle what looks like a tough 2024, should consider buying Lloyds shares.
But, either way, I don’t think it would be wise ignore them.
