Shares in Lloyds Banking Group (LON:LLOY) are on track to lose about a fifth of their value this year, underperforming the benchmark FTSE 100 index. The dip in Lloyds’ share price this year, however, is largely in line with that of other blue-chip peers, with RBS (LON:RBS) down by nearly a quarter, and Barclays (LON:BARC) and HSBC (LON:HSBA) down by about 21 and 15 percent, respectively.
Lloyds and Brexit
Brexit is undoubtedly one of the greatest risks for Lloyds, going forward, with the group – the country’s biggest mortgage lender – seen as more exposed to the UK economy than its peers. Adding to concerns was the performance of the bailed-out lender in the latest Bank of England health check – while Lloyds passed the stress test and is not required to submit a revised capital plan, it emerged as one of the worst performers given the size of its mortgage book.
UBS, however, remained upbeat on the lender and peers RBS and Barclays following the stress test results.
“In the event that a Brexit transition is ultimately agreed – the path to which does look potentially bumpy – we’d expect to see these profitable, capital generative stocks re-rate materially,” the broker’s analyst Jason Napier commented, as quoted by Interactive Investor.
Lloyds meanwhile has stepped up preparations for the UK’s departure from the EU and is planning to operate three subsidiaries in continental Europe.
The start of 2019 is also likely to mark share buyback expectations, with the bailed-out lender reportedly planning buying back almost £2 billion of its own shares, doubling this year’s amount. The plan, however, is not expected to be finalised until a board meeting in February. Deutsche Bank, however, reckons that a figure close to £1.5 billion is more likely.
Proactive Investors meanwhile recently quoted Helal Miah, investment research analyst at The Share Centre, as sounding an upbeat note on Lloyds, arguing that the lender “has made good progress in restructuring itself and cutting costs, so much so that dividends have been restored to historic norms as profits have recovered”.