Lloyds share price slides as Goldman Sachs turns bearish on lender

on Sep 26, 2016
Updated: Mar 11, 2020

Shares in Lloyds Banking Group (LON:LLOY) have lost more than two percent in London this morning, underperforming the broader market, after analysts at Goldman Sachs turned bearish on the shares, pointing to increased competition and lower rates. The comments mark another blow for the bailed-out lender after fund managers warned last week that investors hanging on to shares in the London-listed bank in the hope of a dividend windfall stood to be disappointed.

As of 08:40 BST, Lloyds’ share price had fallen 2.52 percent to 54.57p, underperforming the broader market selloff which has seen the benchmark FTSE 100 index shed 1.07 percent to 6,835.49 points so far this morning. The lender’s shares have lost more than 27 percent of their value over the past year, and are down by a little over a quarter in the year-to-date.
Goldman Sachs slashed its rating on Lloyds from ‘neutral’ to ‘sell’ today, and trimmed its price target on the shares by six percent to 50p. The analysts pointed to a market decline in new business share at the FTSE 100 group in the first half of this year, which led to a three-percent annualised decline in mortgage balances.
“We view Lloyds’ margin maintenance strategy as optimal. Nevertheless, we believe increased competition will have a significant impact on profitability, and downgrade our rating,” the analysts said, as quoted by Sharecast. Goldman Sachs, however, noted that the bailed-out lender’s management was pursing the right strategy by choosing to protect margins over market share or even stock, as a substantial pricing cut would have an even more pronounced impact on earnings.
The 22 analysts offering 12-month price targets for Lloyds for the Financial Times have a median target of 66.50p, with a high estimate of 102.00p and a low estimate of 40.00p. As of September 23, the consensus forecast amongst 28 polled investment analysts covering the bailed-out lender advises investors to hold their position in the company.
As of 08:58 BST, Monday, 26 September, Lloyds Banking Group share price is 59.42p.