Lloyds share price: Morningstar remains optimistic on lender ahead of referendum

on Jun 14, 2016
Updated: Mar 11, 2020

Morningstar remains optimistic on Lloyds Banking Group (LON:LLOY) in the run-up to the EU referendum, arguing that the group will deliver double-digit return this year. The comments are a boost for Lloyds, whose shares have been under pressure ahead of next Thursday’s vote, with the bailed-out lender seen as one of the UK banks, along with FTSE 100 peer Barclays (LON:BARC), likely to be hit the hardest by a potential Brexit.

As of 14:30 BST, Lloyds’ share price had lost 1.76 percent to 63.10p, drifting further below the government’s break-even price of 73.6p, and underperforming the benchmark FTSE 100 index which is 1.13 percent worse off at 5,976.96 points. The lender was the biggest Footsie faller in yesterday’s session, closing 4.21 percent in the red at 64.23p.
Despite the recent falls in Lloyds’ share price, Morningstar analyst Stephen Ellis said in a note today that he was optimistic the lender would deliver double-digit return this year, along with a 2016 forward projected dividend yield of 5.8 percent.

“With noncore assets and government ownership now down to minimal levels, Lloyds is re-emerging as the bank it once was: a strong, conservative, and impressively profitable retail-focused institution,” Ellis pointed out, as quoted by Morningstar. He, however, warned that while losses at the bank had stabilised, they could rise if the UK economy worsened, something which many fear would happen if the country left the EU.
Ellis’ comments come after analysts at JPMorgan noted yesterday that the uncertainty in the run-up to the EU referendum and the ongoing market selloff was an opportunity to bet on the FTSE 100 lender’s shares. Investec meanwhile expects Lloyds’ stock to enjoy a ‘Bremain’ bounce on June 24 if the UK votes to remain in the EU.
As of 15:02 BST, Tuesday, 14 June, Lloyds Banking Group share price is 63.26p.