Lloyds share price: Fund manager sees stock as undervalued

on Apr 25, 2016
Updated: Oct 21, 2019

Lloyds Banking Group (LON:LLOY) is still very cheap despite a big improvement in its performance, Fidelity Special Situations fund manager Alex Wright has told Morningstar. The comments, which are a boost for the bailed-out lender, come ahead of the group’s first-quarter update later this week.

Lloyds’ share price has fallen into negative territory in today’s session, having slipped 0.55 percent to 67.63p as of 13:17 BST, largely in line with losses in the broader London market. The group’s shares have lost more than seven percent of their value in the year-to-date, and are trading below the taxpayer’s break-even price of 73.6p.
Alex Wright, fund manager at Fidelity Special Situations, said in an interview with Morningstar’s Emma Wall today that Lloyds had been a long-standing position for him, comprising about five percent of the fund. Wright notes that the stock is still very cheap despite what he argues is a ‘big improvement’ in the group’s performance over the past couple of years.

“Earnings have really recovered here post the financial crisis, really strengthened the balance sheet and the company is now trading on only about nine times forward earnings […] so a big discount despite that recovery,” Wright said, as quoted by Morningstar, adding that the stock was also “very attractive from a dividend point of view”.
Lloyds, bailed out by the UK government during the financial crisis, restored its dividend payments last year. Earlier this year, the company said that it would pay both an ordinary and a special dividend to shareholders, despite posting a fall in pre-tax profits for 2015.
Wright’s comments come ahead of Lloyds’ first-quarter results this Thursday when the bank, which is still part-owned by the UK government, is expected to unveil a dip in pre-tax profits. Reuters reported today that analyst forecasts suggest that the FTSE 100 group is also expected to have seen its net interest margin, or the difference between the interest banks get from borrowers and what they pay savers, contract to 2.6 percent in the first three months of the year, from 2.7 percent in the prior-year period.
As of 13:53 BST, Monday, 25 April, Lloyds Banking Group share price is 67.71p.