What’s happening to the Lloyds share price?

The Lloyds Bank share price has gained 31% in the past 12 months, but it could be facing its sternest test of the year so far.

| More on:
One English pound placed on a graph to represent an economic down turn

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Lloyds Banking Group (LSE: LLOY) share price fell 3% in volatile trading when the market opened Monday morning (31 March), before steadying.

Close Brothers Group (LSE: CBG) lost 8% by midday, and we see a 34% crash over the past 12 months. It looks like nerves are on edge ahead of the car-loan mis-selling case due to kick off at the Supreme Court on 1 April.

Created with Highcharts 11.4.3Lloyds Banking Group Plc + Close Brothers Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL0www.fool.co.uk

What’s it about?

In October 2024, the Court of Appeal ruled it illegal for lenders to pay commissions to car dealers without fully-informed consent from customers. And now, Close Brothers and MotoNovo Finance are challenging that.

Should you invest £1,000 in Robert Walters Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Robert Walters Plc made the list?

See the 6 stocks

What was happening was car dealers were arranging loans for customers and being paid a commission on the loans from the lenders, apparently without the borrowers being made clearly aware of it.

The Financial Conduct Authority (FCA) has been urging people who think they’re victims of mis-selling to make claims. Lenders were given until December to respond. But that could be up in the air now, depending on what happens next.

What might it cost?

We don’t know what the scale of any compensation might be like. But Alex Neill of Consumer Voice says that if the Supreme Court backs the Court of Appeal it “would be huge and would be on the scale of PPI, with compensation payments running into the tens of billions of pounds.”

Lloyds is one of the biggest lenders caught up in this. At full-year results time, the bank revealed it had set aside a further £700m to cover potential costs. That’s in addition to 2023’s £450m, taking the total to £1,150m. It’s a significant portion of the £4.5bn pre-tax profit reported for the year. And if might get bigger.

The pain could be proportionally more severe for Close Brothers. Reporting on its first half in March, the company said it expects full-year operating expenses to rise by £200m as a result, and made a £165m provision in the half. That’s a lot less than Lloyds in absolute terms, but this is a bank with a first-half operating income of just £390m. It meant a £103m operating loss before tax.

What should investors do?

There’s one main question for us. How much of the potential bad news do we think is already factored into the share price? At Lloyds, there’s a forecast price-to-earnings (P/E) ratio of 11 on the cards.

That’s the highest it’s been for a few years. And I think it might be too much if the financial pain turns out worse than feared. But we have to contrast it with a fall to under seven by 2027 if earnings growth foreacasts are accurate, which looks cheap.

At Close Brothers, a forecast loss makes such measures meaningless. And the tiny profit predicted for 2026 would put the P/E at 60, really not saying much at all.

We each have to decide whether or not to wait and hope. And I expect most people have already made up their minds. It certainly reminds us of the importance of diversification.

Lloyds remains a hold for me, though if I didn’t have any I’d consider buying. And I see Close Brothers as a recovery candidate worth considering too.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Don’t panic as Warren Buffett retires! Just stick to the Oracle of Omaha’s method

The world's greatest investor Warren Buffett is finally retiring, but this isn't the end of his influence. It’s only the…

Read more »

US Tariffs street sign
Investing Articles

Up 10% in a month! Are the Scottish Mortgage shares the best way to play the tech stock recovery?

Harvey Jones is impressed by the resilience shown by Scottish Mortgage shares during recent turmoil. Should tech-focused investors consider buying…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Investing Articles

Is the HSBC share price an absolute steal at today’s levels?

The HSBC share price has had a terrific run despite the recent sell-off. Now Harvey Jones wonders if the FTSE…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

Start investing in the stock market this May with under £1,000? Here’s how!

Christopher Ruane explains some basics of how a stock market newcomer could start investing with under £1,000 and no prior…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

Is this a ‘Warren Buffett moment’ in the markets?

Warren Buffett has been doling out wisdom to shareholders this weekend. Our writer puts one well-known Buffett adage into current…

Read more »

Young woman holding up three fingers
Investing Articles

3 stocks Fools bought over 10 years ago and still hold

The Motley Fool’s approach to investing prioritises buying and holding quality stocks for long periods of time.

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

8.1% yield! Here’s the dividend forecast for British American Tobacco shares through to 2027

British American Tobacco shares have been a prized commodity for investors seeking a large passive income. Are they a potential…

Read more »

House models and one with REIT - standing for real estate investment trust - written on it.
Investing Articles

1 FTSE 250 stock trading well below book value

Stephen Wright thinks investors have a number of attractive possibilities with a FTSE 250 REIT trading at a discount to…

Read more »